Following a quarter that bested his expectations, Beacon Securities analyst Gabriel Leung has raised his price target on Cortex Business Solutions (TSXV:CBX).
On December 5, 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.”
Leung notes that Cortex’s revenue and EBITDA numbers of $3.2-million and $654,000, respectively, bested his expectation of $3.0-million and $202,000.
The analyst says this was a very positive quarter, considering the literal headwinds the company faced.
“In our opinion, the fiscal Q1 results were a very positive data point particularly in light of the headwinds stemming from Hurricane Harvey,” Leung says. “More importantly, we believe the operating leverage thesis is playing out as evidenced by the strong q/q improvement in EBITDA margins, which we believe could continue to improve as revenue growth accelerates.”
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In a research update to clients today, Leung maintained his “Buy” rating, but raised his one-year price target on Cortex from $6.25 to $7.00, implying a return of 63 per cent at the time of publication.
Leung thinks Cortex will generate EBITDA of $2.5-million on revenue of $13.0-million in fiscal 2018. He expects those numbers will improve to EBITDA of $3.8-million on a topline of $15.4-million the following year.