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Cortex Business Solutions gets price target raise at Haywood

Cortex Business Solutions
Cortex Business Solutions
Cortex CEO Joel Leetzow

Following the company’s first quarter results, Haywood Securities analyst Pardeep Sangha has raised his one-year price target on Cortex Business Solutions (Cortex Business Solutions Stock Quote, Chart, News: TSXV:CBX).

On Tuesday, Cortex reported its Q1, 2018 results. The company earned $286,464 on revenue of $3.2-million, a topline that was up 31 per cent over the same period last year.

“As represented by our successful quarter-over-quarter growth of 31 per cent in top-line revenue and a relatively flat cost line, Cortex’s push to grow revenue and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, non-recurring charges, and share-based payments) (1) with our current team is working. We will continue to focus on these metrics and to improve them to grow our business,” said CEO Joel Leetzow. “With substantial milestones achieved in our product, a repeatable business model, the implementation of a proven sales strategy, combined with the delivery of set-up and integration services, Cortex is positioned to sustain and build on results from this quarter and achieve continued growth and value for its stakeholders. ”

Sangha says Cortex is successfully adding new customers, accelerating growth, increasing margins and generating positive cash flows. But the analyst says there is still money to be made on the stock.

“We believe Cortex is significantly undervalued,” the analyst says. “Cortex is currently trading at a 2.3x EV/Revenue multiple of our CY18 estimates, which is lower than its peer group average of 5.2x EV/Revenue multiple of consensus CY18 estimates. We arrive at our target price by applying a 4.0x EV/Revenue multiple to our FY18 forecast. Our target price represents a 3.0x EV/Revenue and 13.3x EV/EBITDA multiple of our FY19 forecasts.

In a research update to clients Wednesday, Sangha maintained his “Buy” rating, but raised his one-year price target on Cortex from $6.00 to $6.50, implying a return of 56.6 per cent at the time of publication.

Sangha thinks Cortex will generate EBITDA of $2.1-million on revenue of $13.8-million in fiscal 2018. He expects those numbers will improve to EBITDA of $4.1-million on a topline of $18.5-million the following year.

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About The Author /

Nick Waddell
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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