It’s still a pass on mdf commerce, says National Bank

After quarterly earnings from mdf commerce (mdf commerce Stock Quote, Charts, News, Analysts, Financials TSX:MDF), National Bank Financial analyst Richard Tse is staying on the sidelines, renewing in a Monday update a “Sector Perform” rating on the stock and $4.00 target price. Tse said it’s unclear whether the better-than-expected fiscal Q3 numbers are a blip or the sign of a more meaningful trend from the company’s procurement business.

Montreal-based digital commerce company mdf commerce released on Monday its third quarter fiscal 2023 financials, coming in with total revenue up 3.3 per cent to $31.7 per cent and adjusted EBITDA of $0.9 million compared to $0.7 million a year earlier.

mdf sold this past October its InterTrade Systems business for $65.8 million, which helped with the company’s debt as well as ongoing cost containment efforts. Management said in its Q3 commentary that the sale resulted in a nine per cent reduction in its global workforce, which when combined with a further ten per cent cull so far this quarter makes for a total headcount drop of about 19 per cent.

mdf said the moves will help generate additional savings over upcoming quarters.

“Our growth efforts are focused on further leveraging our leadership position in the public e-procurement market and capitalizing on the US Government’s spending initiatives,” said President and CEO Luc Filiatreault in a press release.

Tse said mdf’s $31.7 million topline came out ahead of his estimate at $29.4 million as well as the consensus call at $30.4 million, while the same was true for adjusted EBITDA at positive $0.9 million compared to Tse’s estimate at negative $0.2 million and the Street at positive $0.4 million.

Tse noted the 17.3 per cent year-over-year bump in the company’s e-procurement business as a positive while at the same time saying it’s unclear whether that result is a trend or an anomaly, given the company’s numerous strategy pivots of late.

“More specifically, the Company’s MD&A indicated the timeline to achieve its previously provided targets for estimated annual revenue synergies (of at least $15 million) and annual cost synergies (of approximately $5 million) within three years of closing the Periscope acquisition has now expanded to a new range of within three to five years,” Tse wrote.

“Bottom line, we like the fact the Company is honing its focus but we think the stock is already pricing in a robust forward looking outlook and as such, we believe it’s reasonably valued,” he said.

At press time, Tse’s maintained $4.00 target represented a projected one-year return of 7.5 per cent.