Cortex Business Solutions has 50% upside, Haywood says

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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