Buy VersaPay ahead of Q4 results, Haywood says

Ahead of the company’s fourth quarter and fiscal 2017 results, Haywood Securities analyst Pardeep Sangha still thinks VersaPay (VersaPay Stock Quote, Chart, News: TSXV:VPY) is a buy.

On Thursday, VersaPay will report its Q4 and fiscal 2017 results. Sangha thinks VersaPay will post and Adjusted EBITDA loss of $1.9-million on revenue of $1.1-million in the fourth quarter, a topline that would be up 145 per cent over last year’s Q4.

The analyst says things are going the right way for the company.

“VersaPay’s key metrics are trending upwards as the Company is successfully signing new suppliers, bringing those suppliers live, and increasing end-customer adoption,” he says. “For the end of Q4 we are expecting 130 suppliers signed, 111 of which are live. On March 20th the company announced it had surpassed 100,000 businesses on the ARC platform, compared to 57,237 customers at the end of Q3 (September 30, 2017). Subsequent to quarter end, VersaPay announced a contract with a “Big 4” accounting firm in Canada. While it will not be a large revenue generator in the near-term, the partnership provides opportunity for expansion into the firms’ U.S. and global operations.”

In a research update to clients today, Sangha maintained his “Buy” rating and one-year price target of $2.75 on VersaPay, implying a return of 34.1 per cent at the time of publication.

Sangha thinks VersaPay will generate and Adjusted EBITDA loss of $7.6-million on revenue of $3.0-million in fiscal 2017. He expects those numbers will improve to an EBITDA loss of $5.0-million on a topline of $9.0-million the following year.

“On the call we will be listening for: (1) progress with RBC partnership and Big 4 accounting firm; (2) pipeline for new partnerships, especially a US bank; (3) update on US expansion plans; and (4) target metrics for the end of 2018,” Sangha adds.

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