ProntoForms has a 70 per cent upside, PI Financial says

ProntoForms (ProntoForms Stock Quote, Chart TSXV:PFM) delivered a bounce-back year in its fiscal 2018, says PI Financial analyst David Kwan, who on Tuesday reiterated his “Buy” rating while increasing his target price from C$0.70 to C$0.85 per share.

Mobile workflow solutions company ProntoForms reported its fourth quarter and 2018 year end financials last Thursday, coming in with Q4 revenue of $3.3 million, up 25 per cent year-over-year and up four per cent quarter-over-quarter, and an Adjusted EBITDA loss of $0.3 million. (All figures in US dollars unless noted otherwise.)

“We saw consistent results throughout 2018, and we are pleased to report 21 per cent annual recurring revenue growth including another strong quarter of six per cent sequential growth in Q4,” said CEO Alvaro Pombo in a press release. “The growth profile is exactly what we set out to do with revenue growth coming from three main sales initiatives; addition of new direct customers, production from our channels and expansion of enterprise customers.”

Kwan says the Q4 top line of $3.3 million came in-line with his estimate, while the Adjusted EBITDA loss of $0.3 million was slightly better than his negative $0.4 million estimate. The analyst notes that strong bookings helped PFM’s ongoing acceleration in ARR growth, while the company’s losses continued to narrow. He says that management now believes that they have enough cash to fund operations through at least 2020, which is better than the previous guidance of cash through to the end of 2019.

The analyst rates the fourth quarter report as “slightly positive.”

“Following a tough 2017, PFM delivered a strong rebound in 2018 with a significant rebound in organic revenue growth, aided by greater success with large enterprises that also helped reduced the cash burn (along with solid cost control). As a result, PFM is on a much firmer financial footing with organic growth rates returning to the plus-30-per-cent year-over-year range the company has seen historically. Despite the nice pick up in the share price in recent months, the stock is still attractively valued at just 2.2x EV/Sales (CY20),” says Kwan.

The analyst is calling for fiscal 2019 revenue and Adjusted EBITDA of $15.4 million and negative $1.0 million, respectively, and fiscal 2020 revenue and Adjusted EBITDA of $19.8 million and $0.6 million, respectively. Kwan’s new C$0.85 target represented a return of 70 per cent at the time of publication.