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Tecsys is going to $100, this portfolio manager says

The stock may have had a turbulent 2021 but you have to respect Tecsys (Tecsys Stock Quote, Charts, News, Analysts, Financials TSX:TCS) for superlative performance in recent years. And there’s more where that came from, according to Stephen Takacsy of Lester Asset Management, who likes the company’s positioning in the supply chain space. 

“We recommended this three years ago in 2019 at $15 and it’s gone as high as $60. It’s $45 today,” said Takacsy, CEO and chief investment officer at Lester, who spoke on BNN Bloomberg on Monday. “Today, it’s been one of the top 30 best performing stocks on the TSX for the past few years.”

Montreal-based Tecsys is a supply chain solutions provider to the healthcare, retail and service parts, third-party logistics and high-volume wholesale distribution industries. The company’s products focus on aspects such as warehouse management, transportation management, distribution, supply management and retail order management along with financial management and analytics. 

Tecsys is reporting strong demand for its solutions and uptake of its SaaS-based subscriptions, as evidenced in its latest quarter, the company’s fiscal second quarter 2022, delivered at the start of December. Tecsys hit its 11th consecutive quarter of record revenue at $34.3 million, up 12 per cent year-over-year, while SaaS revenue up 28 per cent to $6.6 million and subscription bookings up 50 per cent to $4.0 million. Further breaking down the topline, Tecsys said its professional services revenue was up 11 per cent to $13.1 million.

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“We continue our momentum into yet another quarter of record revenue and solid sequential and year-over-year growth. We are supporting that performance with excellent strides in building out our sales team, strengthening our delivery capacity, investing in our platform, and developing our pipeline,” said Peter Brereton, president and CEO, in a December 1 press release. 

“Our three target verticals are all performing or outperforming expectations, with notable wins in healthcare with three new major hospital networks, and an expanding customer base in global retail and our distribution market. We are confident that we are  favourably positioned as the heightened focus on supply chains turns into greater investment in supply chain agility and the specialized technologies that underpin it,” Brereton said.

Tecsys had to deal with foreign currency headwinds over the quarter, however, which the company said took off about $2 million in revenue and $1.5 million in adjusted EBITDA. The Q2 EBITDA was $3.2 million, down from $4.8 million a year earlier and EPS of $0.5 per share compared to $0.14 per share a year ago.

“Considering the general trajectory of our SaaS revenue, within a few quarters we are likely to see SaaS revenue overtaking maintenance and support as our leading source of recurring revenue,” said Tecsys CFO Mark Bentler in the press release.

For Takacsy, there’s likely lots of upside left to the stock.

“They develop and sell end to end supply chain management software solutions, so they’re right in the sweet spot with the current supply chain problems,” Takacsy said. “Their main clients are healthcare networks in the US where they’re really the de facto leaders and businesses with complex distribution.”

“They just reported another quarter of record results and record backlog and the pullback represents a tremendous buying opportunity,” he said. “We think this stock is going to be $100 stock within a few years easily. A great company.”

Earlier this year, Tecsys was included in the TSX30 for 2021, which recognizes the 30 top-performing stocks over the past three year. Tecsys, with a current market cap of $680 billion, is currently down about six per cent year-to-date although the stock was up 12 per cent back in September when the announcement was made. At the time, TCS had an 181 per cent return over the past three years.

“As one of only five Canadian technology companies included in this year’s ranking, it is a distinct privilege to play this prominent role in Canada’s tech industry both domestically and around the world,” said Brereton in a press release. 

“We build agile enterprise supply chain software and the Tecsys team has worked hard to adapt our business to support the exciting supply chain transformation currently underway globally, while remaining focused on our core values. This effort has clearly paid off. Our inclusion in TSX30 is a testament to the passion and energy we put into enabling our customers’ success as they navigate new levels of complexity and volatility,” Brereton said.

Other tech companies were Shopify, goeasy Ltd., Real Matters and Absolute Software. 

About The Author /

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.
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