Rolling forward his forecast to 2019 has Haywood analyst Pardeep Sangha arriving at an aggressive new price target on Cortex Business Solutions (TSXV:CBX).
In a research update to clients today, Sangha maintained his “Buy” rating on Cortex, but raised his one-year price target on the stock from $4.50 to $5.50, implying a return of 43.2 per cent at the time of publication. Sangha regards the overall risk rating of the stock as “Very High”.
The analyst says he expects Cortex will achieve “20 by 20”, meaning a $20-million run-rate by fiscal 2020. Though this will entail the company nearly double its quarterly revenue, and the analyst explained where he sees this growth coming from.
“We expect growth will be driven by increasing sales in the U.S. oil and gas sector, a bolstered sales team which is now starting to deliver, increasing transaction volumes with existing Canadian oil and gas customers, strengthened channel partners and expansion into additional vertical markets,” says Sangha. “In addition, Cortex is continuing to introduce new product features such as invoice funding through a partnership with FundThrough and reduced manual entries through a partnership with EnterMyInvoice.com. At the end of Q2FY17, Cortex reported cash of $5.4M and no debt. We are expecting Cortex to be cash flow breakeven in Q3FY17. We believe the Company is sufficiently capitalized to execute on its growth plan as acquisitions are incremental to our forecasts.”
Sangha thinks Cortex will generate EBITDA of $300,000 on revenue of $11.0-million in fiscal 2017. He expects those numbers will improve to EBITDA of $1.3-million on a topline of $13.7-million the following year.