VersaPay’s stock could soon return to last year’s highs: PI

Sales growth looks to be picking up for VersaPay (VersaPay Stock Quote, Chart TSXV:VPY), according to PI Financial analyst David Kwan, who last Thursday wrote an update in response to the company’s latest earnings report, saying the stock may be returning to last year’s highs.

Cloud-based invoice and payment company VersaPay announced its Q4 and full year 2018 financials last Tuesday, reporting revenues that were up 37 per cent year-over-year and 28 per cent quarter-over-quarter to $1.5 million and Adjusted EBITDA of negative $1.2 million.

In addition to the record revenue, the company’s annual recurring revenue backlog increased by 46 per cent quarter-over-quarter to a record $1.8 million.

Kwan says that the quarter’s top line beat his and the consensus estimate of $1.3 million, while the Adjusted EBITDA loss was in-line with expectations. He says VersaPay should get more sales from its ARC platform later this year through its customer RBC, which is poised to be a major revenue growth driver for VPY in coming years, says Kwan, who also notes that the company expects to announce details of a partnership with a major global fintech company later this quarter.

Kwan takes the quarterly results as a positive.

“VPY ended the year on a high, with a sharp pick up in key revenue metrics that suggest sales growth is poised to re-accelerate, which when combined with some more positive news flow (including significant partnerships), could help the stock return to the highs seen last year,” he said.

The analyst is leaving his fiscal 2019 revenue forecast unchanged at $9.6 million but is lowering his Adjusted EBITDA estimate to negative $6.9 million from negative $4.6 million. He is introducing fiscal 2020 estimates of $17.9 million in revenue and negative $1.0 million in Adjusted EBITDA.

Kwan is reiterating his “Buy” rating and $2.30 target price, which represents a projected 12-month return on investment of 58.6 per cent at the time of publication.