Data analytics firm NowVertical (NowVertical Group Stock Quote, Charts, News, Analysts, Financials TSXV:NOW) has had a nice pop in its share price over the last couple of months, but there should be more where that came from, according to Beacon Securities analyst Gabriel Leung, who reported on the company’s latest M&A move in a client update on Thursday. Leung maintained a “Buy” rating on the stock and C$1.70 target price, which at press time represented a projected one-year return of 127 per cent.
Toronto-based data analytics and Vertical Intelligence software and services company NowVertical closed on Thursday its previously-announced acquisition of Group Analytics 10 and Inteligencia de Negocios, collectively known as A10 Group.
NOW paid $4.95 million in cash, subject to holdbacks, $550,000 in shares at the great of NOW’s 20-day VWAP on closing and $1.00 per share and an earn-out consideration paid over four fiscal years based on certain adjusted EBITDA targets. (All figures in US dollars except where noted otherwise.)
NowVertical said the deal significantly expands its operations in Brazil, Chile and Mexico.
“We see an exceptional future and accelerated growth ahead for NOW in one of the world’s most exciting big data and analytics markets. The Acquisition is expected to increase NOW’s annual revenues by approximately $23.5 million and Adjusted EBITDA by approximately $2.5 million (unaudited), pre-synergies,” said NOW Chairman and CEO Daren Trousdell in a press release.
In his comments, Leung said he is now modelling about ten per cent organic growth and EBITDA margins of about ten per cent for calendar 2024 for NOW, which would include a full year from A10 Group as well as NOW’s other two previously announced acquisitions of Acrotrend and Smartlytics (combined, the latter two add about $6.1 million in revenue and about $1.9 million in EBITDA, Leung said.
“Given the company’s significantly increased scale, positive EBITDA position and the strong fundamentals underlying NOW’s industry focus (i.e. analytics and AI), we are maintaining our Buy rating,” Leung said.
“With the recent slew of acquisitions now closed, we believe the main catalysts for the stock include evidence of successful revenue and cost synergies, which could come in the form of better-than-expected organic revenue growth and margin accretion over and above our current (modest) expectations,” he said.
Leung is forecasting NowVertical to finish 2022 with revenue of $26.9 million and negative EBITDA of $2.1 million. For 2023, he is calling for $65.0 million in revenue and positive $4.3 million in EBITDA and, for 2024, he is estimating $74.5 million in revenue and $7.1 million in EBITDA.
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