Haywood launches coverage of TECSYS with a buy rating

Strong quarterly results, quality management and record bookings are just some of the reasons why Haywood Securities’ Pardeep Sangha likes TECSYS Inc. (TECSYS Stock Quote, Chart TSX:TCS).

The analyst launched coverage of the stock on Thursday, rating it a “Buy” with a $19.00 target price, representing a 43.5 per cent return on investment as of publication date.

Montreal-based TECYSYS, which provides supply chain management software for the healthcare industry as well as industries with complex distribution networks, has seen its share price drop 21 per cent year-to-date, which Sangha attributes to the overall market selloff. The company has also faced a climate of uncertainty surrounding healthcare policy in the US, which has hampered its growth, says Sangha, but the company should see revenue grow by ten per cent over its fiscal 2019 (ending April 31, 2019) and by 18 per cent in fiscal 2020, he adds.

“Revenue growth is driven by increased healthcare spending, contribution from the OrderDynamics acquisition, expansion into hospital pharmacies and a strong pipeline from existing and new customers,” the analyst says.

The analyst points out that TCS grew its backlog to $51.7 million by the end of its Q2 (ended October 31), which compares to last year’s $42.2 million, and had signed six new accounts over the quarter, bringing its bookings to $16.2 million, notably increasing its bookings from the company’s existing healthcare customer base by 196 per cent year-over-year.

“We like TECSYS because of its experienced management team, solid track record, strong balance sheet, large market opportunity, return to growth, and renewed focus on acquisitions,” says Sangha.

The analyst expects revenue of $77.9 million in FY19 with EBITDA of $6.8 million and revenue of $92.0M in FY20 with EBITDA of $11.6 million.