Real Matters has 85% upside, Canaccord Genuity says

A quarter that was better than he expected has Canaccord Genuity analyst Robert Young feeling good about Real Matters (Real Matters Stock Quote, Chart, News: TSX:REAL).

On Tuesday, Real Matters reported its Q4 and fiscal 2017 results. In the fourth quarter, the company lost $3.82-million on revenue of $82.9-million, a topline that was up 1.9 per cent from the same period last year.

“This was a landmark year for Real Matters on many fronts — we launched two of the largest Tier 1 lenders in the U.S., expanded our platform into the title and closing industry, and went public in May,” said CEO Jason Smith. “Over all, our business grew substantially despite significant market headwinds in 2017, and we are very pleased with our organic growth. Our appraisal market share was up 30 per cent in 2017 and we ended the year with 6.5 per cent market share — led by significant gains with our Tier 1 lender clients. Our title and closing market share increased 17 per cent despite the significant decline in the refinance origination market,” said Real Matters chief executive officer Jason Smith.

Young says this is a case of a company delivering on its promises.

“Real Matters reported a strong quarter with metrics ahead of consensus on both the top and bottom line,” the analyst notes. “As important, the management team is doing what it said it would do. It is (1) delivering on market share growth with new Tier-1 customers; (2) growing the base of Tier-2 customers (60+ of the top 100 are customers and while no new Tier-2s were announced in Q4, multiple have been added in 2017); (3) rolling out the Next Generation T&C product, with Real Matters now actively engaged on RFPs with multiple Tier-2 and one Tier-1 customers; and (4) building momentum in the Solidifi Title business with cross sell momentum into the Solidifi base of Tier-3 and Tier-4 customers.

In a research update to clients today, Young maintained his “Buy” rating and one-year price target of $16.00 on Real Matters, implying a return of 84.5 per cent at the time of publication.

Young thinks Real Matters will generate EBITDA of $14.0-million on revenue of $367.6-million in fiscal 2018. He expects those numbers will improve to EBITDA of $157.0-million on a topline of $454.8-million the following year.