Real Matters is real pricey, this investor says

The real estate business is booming and that’s good news for Canadian tech company Real Matters (Real Matters Stock Quote, Chart, News TSX:REAL), which has just come off a whale of a year in 2019 and has its sights on even more fireworks in 2020.

But as rosy as the picture might appear for REAL, investors may want to hold off on buying at these inflated prices, says Peter Imhof, vice president and portfolio manager at AGF Management.

“This is a tough one. They went public two-and-a-half years ago and the stock subsequently went pretty much straight down,” says Imhof, speaking to BNN Bloomberg last Friday. “We owned it as a private company. We actually sold the majority of our holdings on the IPO and then over the first couple of days that it started trading as well and then we haven’t really revisited it.”

“The valuation isn’t cheap but the housing market is quite strong in the US and refinancings are going strong, as well, so they’ve put up some really big numbers over the last couple of quarters,” he says. “They reported [on January 30] and beat expectations, so the stock, when you look at the chart it looks like it wants to go higher.”

“[But] we’re just not there and I don’t really want to participate at these valuations,” Imhof said.

Network services provider for the mortgage lending and insurance industries, Real Matters was the top-performing tech stock on the TSX exchange in 2019, finishing the year up 273 per cent on the back of positive results from its initial penetration into the US market, where the company’s growth potential still remains huge.

Sales last year in the United States saw a 26-per-cent growth rate with the company expecting US growth in its appraisal software business of between 15 and 20 per cent again in 2020.

Shares slumped on Real Matters’ fiscal first quarter 2020, reported on January 30, which featured net revenue of $35.3 million, up 87.1 per cent year-over-year, and adjusted EBITDA of $14.5 million, up from $1.7 million a year earlier and representing margins of 41 per cent compared to nine per cent a year earlier. (All figures in US dollars.)

“We reported very strong financial performance in the first quarter,” said CEO Jason Smith in a press release. “The US mortgage market was robust in the first quarter, led by a significant year-over-year increase in refinance volumes. Our continued top performance ranking with US Appraisal clients led to stronger than anticipated market share gains with some of our largest clients, which bolstered our first quarter Revenues.”

Showing confidence in the company’s momentum, REAL is continuing with its share buy-back program started last June, announcing with the quarterly release on January 30 that it would be more than doubling the maximum aggregate for its normal course issuer bid from $20 million to $46 million. So far, the company has purchased and cancelled 2.1 million shares.

REAL finished the month of January up 13 per cent.

About The Author / Jayson MacLean

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.

Comment

One thought on “Real Matters is real pricey, this investor says”

J Murphy says:

July 21, 2020 at 10:02 pm

Real Matters has gone from $700 Million to 3 billion in a year, with net income increasing modestly. It just doesn’t make sense. There’s something going on here that needs to be investigated.