Following the company’s second quarter results, Echelon Wealth Partners analyst Ralph Garcea has raised his target price on Enghouse Systems (TSX:ENGH).
On Thursday, ENGH reported its Q2, 2018 results. The company reported EBITDA of $25.4-million on revenue of $85.2-million, a topline that was up 7.2 per cent over the same period last year.
Garcea says this quarter was better than he expected and better than the street consensus, particularly on the bottom line.
“ENGH reported revenue of $85.2M (EWP: $85.6M; Cons: $86.6M), Adj. EBITDA of $25.4M (EWP: $24.1M; Cons: $24.1M), and EPS of $0.56 (EWP: $0.48 Cons: $0.48). EPS benefited from a lower tax rate than expected (21% vs. our 23% estimate),” the analyst notes. “CFOPS came in at $21.8M in the quarter (Cons: $20.1M). Gross margin was 69% versus our 68% estimate. Foreign exchange tailwinds had a $2.2M impact on top line performance in FQ218 – ENGH derives ~70% of revenues outside the US. Its recent Mobilethink acquisition contributed ~$300K (less than one month) of revenue in the quarter. CEO Steve Sadler wants to pick up the pace of acquisitions, noting there should be more in F2018 (already three) than F2017 (only two deals). He noted organic growth will be focused in the US with economic conditions improving, and Vince Mifsud coming on board as President. ENGH ended FQ218 with record cash levels of $155.3M. Concurrent with results, ENGH declared its dividend of $0.18/sh, payable August 31, 2018.”
In a research update to clients today, Garcea maintained his “Buy” rating on Enghouse Systems but raised his one-year price target on the stock from $75.00 to $80.00, implying a return of 16 per cent at the time of publication.
Garcea thinks ENGH will generate Adjusted EBITDA of $102.0-million on revenue of $344.3-million in fiscal 2018. He expects those numbers will improve to EBTDA of $112.0-million on a topline of $373.3-million the following year.