Mobile software solutions company ProntoForms (TSXV:PFM) is finding its way towards eventual EBITDA positivity, says Blair Abernethy of Industrial Alliance Securities, who in a research update to clients on Wednesday reiterated his “Speculative Buy” rating and C$0.65 target price for PFM.
On Tuesday, ProntoForms announced a collaboration with field service software vendor ServiceMax, a subsidiary of General Electric, to produce integrated smart mobile forms in ServiceMax’s Predix Field Service Management solution.
Abernethy views the collaboration as an incremental positive, asserting that it should significantly increase PFM’s market exposure to larger enterprise customers and, in fact, it is already adding to ProntoForms’ pipeline.
“We believe that Pronto is also well-positioned to expand its product offering in the next few years,” says Abernethy. “The company’s platform collects and relays (both upstream and downstream) important operational data to other enterprise systems and could potentially add more sophisticated reporting and analytics technologies to enhance its value proposition for customers,” he says.
The analyst has left his estimates unchanged but expects that PFM will near break-even in terms of EBITDA “over the next few years.” Abernethy mentions a number of potential catalysts, namely, large enterprise wins, quarterly recurring revenue growth acceleration, demonstrated traction with new partners and tuck-in product or customer-base acquisitions.
Abernethy is calling for a 2018 Adjusted EBITDA loss of $2.7 million (all figures in US dollars unless otherwise noted) on revenue of $12.2 million and a 2019 Adj. EBITDA loss of $1.9 million on a topline of $14.8 million.
The analyst says PFM is trading at 2.6x EV/Sales on his 2018 estimates, which he says compares favourably with larger SaaS companies in the roughly 5.0-6.0x range. The C$0.65 target represents a projected return of 100.0 per cent at the time of publication.