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NowVertical keeps Buy rating with Beacon

Investment bankers Beacon Securities has reiterated a “Buy” rating on Canadian analytics stock NowVertical Group (NowVertical Group Stock Quote, Charts, News, Analysts, Financials TSXV:NOW) in a Thursday report.

Toronto-based NowVertical is a data analytics and vertical intelligence software and service company with a strong M&A program. Formed in September 2020, NOW has completed a number of acquisitions, including newly announced closings on Acrotrend, a UK-based customer data and analytics consultancy company, and Smartlytics, an end-to-end data solutions firm with customized service to larger organizations. 

NowVertical announced the moves in a January 12 press release where it also announced a new credit agreement with TD Bank for C$7 million.

“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 the press release.

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Commenting on the acquisitions, Beacon analyst Gabriel Leung said the two new buys generated combined past 12 months revenues and EBITDA of $6.1 million and $1.9 million, respectively. Leung noted that NOW has another large acquisition pending in A10 Group, which had trailing 12 months revenue of $23.5 million and $2.5 million in EBITDA. 

“Pro-forma (i.e. post its three recently announced acquisitions), NOW should have ~$2 million in cash against ~$17 million in debt (before the new TD facility), shares outstanding (basic) of 67 million, and a revenue and EBITDA run-rate of ~$70 million and ~$4.5 million (all pre-synergies). In our opinion, the new TD facility will help to provide financial flexibility as NOW progresses with integration efforts,” Leung wrote. (All figures in US dollars except where noted otherwise.)

Leung estimated NOW to be currently trading (pre-synergies) at an EV/Sales multiple of 0.6x and an EV/EBITDA multiple of 9.0x, versus its peer group at 3.5x and 15x, respectively.

On its financial projections, Leung estimated NOW’s 2022 revenue and EBITDA at $26.9 million and negative $2.1 million, respectively, and moving to 2023’s $37.9 million and $0.3 million, respectively. The call for 2024 is $42.8 million in revenue and $1.4 million in EBITDA.

After returning negative 55 per cent in 2022, NOW is on the upswing so far in the new year, with the stock up 42 per cent year-to-date. With his “Buy” rating, Leung has maintained a 12-month target of C$1.70 per share, which at the time of publication represented a projected return of 110 per cent.

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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