Pivot Technology has lots of upside, Echelon Wealth says

IT services company Pivot Technology Solutions (Pivot Technology Solutions Stock Quote, Chart TSX:PTG) will get a fresh perspective from its new board appointment, says Echelon Wealth Partners analyst Gianluca Tucci, who on Monday maintained his “Buy” rating and C$2.50 target price.

Pivot announced on Monday the appointment of Christopher Formant to its Board of Directors, effective immediately. In an update to clients, Tucci calls the move a positive for PTG.

“This appointment is the outcome of an extensive Board search with the objective of recruiting an independent, seasoned Director. We view the appointment as positive as Pivot continues with its commercial transformation and believe Christopher brings relatable experiences in creating and enhancing shareholder value. We note the Board is now comprised of seven individuals, five of whom are independent, and represents a ‘full’ Board, in our view,” Tucci says.

Pivot announced its fourth quarter financials on March 27, generating weaker revenue than expected for the second quarter running, notes Tucci, who nonetheless points that gross profit was relatively stable and gross margin came in at a record 14.1 per cent.

The analyst notes that going forward, Pivot could see monetization of its Smart Edge platform as early as this year, with the company now considering the possibility of a full divestiture rather than a standalone spin-out.

Tucci says that PTG is currently trading at an EV/Sales and EV/EBITDA multiple of 0.12x and 7.8x, respectively, versus its peer comparable average of 0.58x and 10.4x, respectively.

The analyst has made no adjustments to his 2019 estimates, calling for $1.206 billion in revenue and $18 million in Adjusted EBITDA. (All figures in US dollars unless noted otherwise.) His C$2.50 target represents a projected total return of 122 per cent at the time of publication.