ProntoForms has 87.5% upside, says Industrial Alliance

A quarter that was in-line with his expectations isn’t dimming Industrial Alliance Securities analyst Blair Abernethy’s bullish take on ProntoForms (ProntoForms Stock Quote, Chart, News: TSXV:PFM).

This morning, ProntoForms reported its Q2, 2017 results. The company lost $1.2-million on revenue of $3.3-million, a topline that was 13 per cent better than the samer period last year.

“Direct revenue continues as a strong engine of growth, delivering 41-per-cent recurring revenue growth over the comparable second quarter in 2016, and accounting for 64 per cent of the quarterly recurring revenue,” said CEO Alvaro Pombo. “Total recurring revenue growth was 16 per cent over the second quarter of 2016 and we continue to have a strong operating leverage with 91-per-cent gross margin. Data collection, through flexible workflows, is now core to field automation initiatives of any scale. Inspections, human actions in the field, and IoT [Internet of things] digitalization of assets are generating more workflows that constantly evolve, and our platform is a great solution to these growing requirements. To accelerate market penetration, we have adopted a partner strategy to complement our direct initiatives and this market approach is strengthening.”

Abernethy notes that ProntoForms’ revenue number came in just below his and the street consensus estimate of $3.4-million. But the analyst says that on the heels of a $5.8-million equity financing he thinks gives the company momentum going forward, there are a number of positives for investors to focus on.

“In 2017, we see several potential positive catalysts for ProntoForms’ stock, including large direct sales enterprise wins, quarterly recurring revenue growth acceleration, and significant new channel partners,” the analyst says.

In a research update to clients today, Abernethy maintained his “Speculative Buy” rating and one-year price target of $0.75 on ProntoForms, implyign a return of 87.5 per cent at the time of publication.

Abernethy thinks ProntoForms will post Adjusted EBITDA of negative $3.6-million on revenue of $14.0-million in fiscal 2017. He expects those numbers will improve to EBITDA of negative $1.7-million on a topline of $18.5-million the following year.