ProntoForms is still undervalued, says Industrial Alliance

The completion of a private placement puts ProntoForms (ProntoForms Stock Quote, Chart, News: TSXV:PFM) in a better place to execute on its business plan, says Industrial Alliance Securities analyst Blair Abernethy.

Yesterday, ProntoForms announced the completion of financings that will net the company $5.77-million. The company said the cash injection would be used for working capital and general corporate purposes.

Abernethy says he views the additional captial as a way for ProntoForms as a way to get where it is going more quickly.

“In our view, this financing is an incremental positive for the Company as it provides Pronto with more financial flexibility to support its working capital, fund its growth, and pursue technology-based tuck-in acquisitions,” he says. “In terms of acquisitions, we believe Pronto could accelerate its product roadmap through the acquisition of emerging technologies, particularly in the artificial intelligence space. We also see opportunities for Pronto to broaden its offering through the acquisition of other form automation vendors, which can allow Pronto to grow its existing customer base and cross-sell existing products.”

The analyst adds that this development takes risk off the table.

“Pronto is now better positioned to invest in product development and sales and marketing in order to sustain its high growth rate. We believe this financing significantly mitigates any going concern or liquidity risk for the Company for the next few years,” he adds.

In a research update to clients today, Abernethy maintained his “Speculative Buy” rating and one-year price target of $0.75 on ProntoForms, implying a return of 82.9 per cent at the time of publication.

Abernethy thinks ProntoForms will generate Adjusted EBITDA of negative $3.5-million on revenue of $14.7-million in fiscal 2017. He expects those numbers will improve to EBITDA of negative$1.7-million on a topline of $19.4-million the following year.