Industrial Alliance Securities analyst Elias Foscolos is moving off the sidelines on Computer Modelling Group (Computer Modelling Group News, Stock Quote, Chart TSX:CMG). In a research update on Wednesday, Foscolos moved his rating from “Hold” to “Buy,” while maintaining his $7.75 target price.
The analyst notes that CMG’s Q4 fiscal 2019 came in ahead of expectations on Prior Period and Perpetual revenue, while management said that there were one-time items that gave a boost to Perpetual sales which are unlikely to recur. The company also sported an increase in deferred revenue balance which Foscolos says was a confidence booster for investors as it signalled that CMG’s fiscal 2020 should be more or less flat.
The analyst has made no changes to his model on the stock and his outlook remains the same, but it’s the share price depreciation of nine per cent over the past month that figures into his rating change.
“CMG’s stock has experienced some recent price weakness, returning negative nine per cent since we downgraded to a Hold in early June on an unchanged outlook. Furthermore, the dividend yield of 5.8 per cent, which we do not view as being at risk in the near term, is amongst the best in the sector. As such, we are getting back into the game with an upgraded Buy recommendation (previously Hold),” Foscolos writes.
The analyst is forecasting fiscal 2020 revenue and OIBDA of $74 million and $32 million, respectively, and fiscal 2021 revenue and OIBDA (Operating income before depreciation and amortization) of $76 million and $34 million, respectively. His $7.75 target represents a projected return including dividend of 19 per cent at the time of publication.
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