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Cortex Business Solutions has 50% upside, Haywood says

Cortex Business Solutions
Cortex Business Solutions
Cortex CEO Joel Leetzow

He categorizes the risk profile on the stock as “very high”, but Haywood analyst Pardeep Sangha says there is also a big potential reward to shareholders of Cortex Business Solutions (Cortex Business Solutions Stock Quote, Chart, News: TSXV:CBX).

On Wednesday, October 25, Cortex will report its fourth quarter and fiscal 2017 results. Sangha expects the company will post Adjusted EBITDA of $100,000 on revenue of $3.0-million, a topline that is slightly above the street consensus of $2.9-million.

Sangha says Cortex could be facing some literal headwinds.

“We believe Cortex could face some short-term revenue pressure due to the flooding in the Houston area,” the analyst says. “However, we expect increased activity in FY18 from the infrastructure re-build following the severe hurricanes this year”.

Sangha notes he will be watching for a number of developments at Cortex.

“On the conference call, we will be listening for: Growth in metrics, particularly recurring Access Fees which we are forecasting at $1.7M, compared to $1.3M in Q4FY16; An update on management’s goal of achieving a $20M revenue run-rate by 2020; Management’s expectations for profitability and EBITDA expansion in FY18, as last quarter Cortex achieved its first quarter of profitability in the Company’s history; Expansion of sales in the US market and in additional vertical markets beyond the oil/gas industry,” he says.

In a research update to clients today, Sangha maintained his “Buy” rating and one-year price target of $6.00 on Cortex Business Solutions, implying a return of 50 per cent at the time of publication.

Sangha thinks Cortex will generate Adjusted EBITDA of $400,000 on revenue of $11.1-million in fiscal 2017. He expects those numbers will improve to EBITDA of $1.4-million on a topline of $13.8-million the following year.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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