Electronic invoicing company Cortex Business Solutions (Cortex Business Solutions Stock Quote, Chart TSXV:CBX) recently closed on the previously announced acquisition of Powervision Software, a move which analyst David Kwan of PI Financial takes as a positive for the company.
In a client update on Monday, the analyst reiterated his “Buy” rating while raising his one-year target price for CBX from $6.60 to $7.25.
Last week, Calgary-based Cortex reported closing on the $7-million Powervision deal, one which the company says will add about $2.3 million in revenue for the 2018 calendar year.
Kwan highlights the fact that Powervision has been generating strong EBITDA margins of over 50 per cent in recent quarters, which compares to CBX’s roughly 20 per cent margins as of late.
The analyst sees the impact to be positive and has increased his fiscal 2019 estimates to $15.8 million in revenue (was $14.2 million) and $3.2 million in Adj. EBITDA (was $2.5 million).
“Management reiterated its 20 by 20 target (achieve a $20 million annual revenue run rate by fiscal 2020). Our forecasts are more conservative, as we do not have the Company hitting their target for a few more quarters,” says Kwan.
Cortex Business Solutions Stock is Undervalued
Kwan’s $7.25 target is derived from the average of a 2.5x his calendar 2020 Sales estimate ($18.1 million) and his discounted cash flow valuation. His target represents an 83.4 per cent return at the time of publication.