NowVertical is a double, says Echelon

It’s only a couple of weeks in and Canadian big data intelligence stock NowVertical Group (NowVertical Group Stock Quote, Charts, News, Analysts, Financials TSXV:NOW) is already up over 40 per cent. But there should be more where that came from, according to Echelon Capital Markets analyst Rob Goff, who provided an update to clients on the company on Friday, saying NOW is poised to hit positive EBITDA with its fourth quarter 2022 results.

NowVertical, which provides software solutions to enterprise customers to aid in data transformation, analytics and use across industry verticals, announced on Thursday that it has obtained a $7 million credit facility with TD Bank, a move which follows on another recently announced non-dilutive $7 million credit facility with Export Development Canada (EDC).

The TD line of credit comes at the Sterling Overnight Rate, currently at 3.4 per cent plus a 2.5 per cent premium for a total of 7.9 per cent interest. EDC backed the TD loan through its Export Guarantee Program, which offers up to a $10 million guarantee for lending financial institutions to extend lines of credit, term loans or margin international assets. 

Along with the credit facility, NOW also announced the closing on its acquisitions of Acrotrend Solutions and Smartlytics.

“Today, we are pleased to add a schedule 1 Canadian bank to our group of corporate lenders. It is another validation of our vision to have lenders like TD Bank, and Export Development Canada support our program by backing us with non-dilutive, cost-effective capital solutions,” said Daren Trousdell, Chairman & CEO of NOW, in a press release.

Goff said he sees NowVertical emerging as a mid-market-focused, fusion analytics firm which is leveraging its solutions for high-value, data-driven decision-making. He said the emerging field of fusion analytics has at its vanguard names like Palantir and C3.ai, while companies like GM, the US Department of Defense and Netflix are all endorsers.

“With demonstrated organic and inorganic growth, advancing scale and profitability, we look for an aggressive revaluation of the shares. We believe the prospective returns linked to a scale-driven revaluation of its shares represent a strong return profile against the associated execution risks where NOW’s track record and synergies warrant confidence that it will be successful,” Goff wrote.

With the update, Goff reiterated a “Speculative Buy” rating on NOW and 12-month target of C$1.60 per share, which at the time of publication represented a projected return of 98 per cent.

On NOW’s M&A strategy, Goff said he’s looking for double-digit organic growth from NOW’s acquired companies to move above 20 per cent as revenue synergies from cross-selling are realized.

For NOW’s upcoming fourth quarter 2022 results, Goff is estimating revenue at $9.0 million compared to $8.4 million for the third quarter 2022 and EBITDA moving from negative $0.3 million for the Q3 to positive $0.2 million.

“NowVertical continues to successfully screen for and partner with high-growth founders looking for its platform leverage and cross-selling opportunities where earnout structures provide attractive upside,” Goff said.