In a research update to clients today, Agostino maintained his “Buy” rating on Tecsys, but raised his one-year price target on Tecsys from $12.00 to $17.00, implying a return of 14.5 per cent at the time of publication.
Agostino arrives at his new target price in part by introducing his fiscal 2020 estimates on the company, and in part because of a recent bought deal that firmed up its balance sheet.
“Our TP revision is based on: 1) a blended C2018/19 EV/EBITDA (which includes new F2020 estimates) vs. C2018 previously as we roll our valuation period forward 6 months with the conclusion of F2017; 2) a slight increase in estimates as noted above, and 3) a 1x increase in our valuation multiple to 13x to align TCS with its peer groups as supply chain/logistics comps trade at 12.6x, healthcare software peers trade at 13.0x, and medical equipment providers trade at 14.7x (all excl. outliers). TCS currently trades at 18.0x our NTM EV/EBITDA,” notes the analyst.
Agostino thinks Tecsys will post Adjusted EBITDA of $10.15-million on revenue of $75.35-million in fiscal 2018. He expects those numbers will improve to EBITDA of $13.13-million on a topline of $85.1-million the following year.
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