Absolute Software is still undervalued, Industrial Alliance says

Ahead of the company’s first quarter results, Industrial Alliance Securities analyst Blair Abernethy is maintaining his bullish stance on Absolute Software (Absolute Software Stock Quote, Chart: TSX:ABT).

On November 2, before market open, Absolute Software will report its Q1, 2109 results. Abernethy thinks the company will post Adjusted EBITDA of $2.8-million on revenue of $23.7-million. The street consensus has the company posting the same EBITDA number, but a slightly higher topline of $24.0-million.

Abernethy outlined some things he will be looking at from the coming report.

“Last quarter, management provided its F2019 guidance, with revenue expectations of $96.0-99.0-million, representing a 3-6% growth, which was below our prior expectations of ~10%,” he said. “However, EBITDA margins are improving and expected to be int he 13-16% range. For Q1, we are watching for signs of stabilization in the Education vertical, which has been holding back the growth of Absolute’s contract base in the past two years.”

But the analyst says the bottom line in that there is still a lot to like about ABT, going forward.

“Given the significant product enhancements and refocussed sales force, we expect and improving sequential sales trajectory through F2019,” he adds.

In a research update to clients today, Abernethy maintained his “Buy” rating and one-year price target of $10.50 on Absolute Software, implying a return of 35.8 per cent at the time of publication.

The analyst thinks ABT will generate EBITDA of (all figures USD) $13.5-million on revenue of $98.2-million in fiscal 2019. He expects those numbers will improve to EBITDA of $16.9-million on a topline of $108.2-million the following year.