Despite the optics of its share price, Real Matters’ (TSX:REAL) business plan is on track, says National Bank Financial analyst Richard Tse.
With its share price down significantly since its May IPO, Tse recently spent a day with Real Matters CEO Jason Smith and CFO Bill Herman. The analyst says he came away with comfort about the company’s outlook.
“While some of the reasons behind that pullback remain -like the upcoming lockup lift- what we heard gave us comfort that the financial outlook when paired with the stock price pullback presents a compelling risk-to-reward profile,” the analyst says. “As we see it, REAL is pricing in expectations for sub 10% growth when the outlook that’s driven by share gains has revenue growth accelerating to 20-25% over the next five years from the current lull care of a 2016 spike from an outsized move in the refi market.”
In a research update to client today, Tse maintained his “Outperform” rating and one-year price target of $15.00 on Real Matters, implying a return of 67 per cent at the time of publication.
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Tse thinks Real Matters will generate EBITDA of $8.0-million on revenue of $294.9-million in fiscal 2017. He expects those numnes will improve to EBITDA of $16.9-million on a topline of $357.6-million the following year.
Tse says his thesis remains the same on Real Matters.
“We see Real Matters as a disruptive platform company that’s executing on an aspirational course to become the platform leader in the residential Appraisal and Title and Closing market in North America.” he says. “The early evidence of this is Real Matters’ continued market share gains in Appraisals. We also believe that the acquisitions consummated by Real Matters have not only been to acquire growth but to fortify the Real Matters platform by adding product breadth and channels to capture outsized organic growth going forward. Finally, we believe the foundation to driving the above is Real Matters’ templated process which is underpinned by technology.”