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Tecsys has a 60 per cent upside, says Echelon

Top and bottom line beats in its latest quarterly numbers are looking good on supply chain management software company Tecsys (Tecsys Inc Stock Quote, Charts, News, Analysts, Financials TSX:TCS), according to Echelon Capital Markets analyst Amr Ezzat, who delivered an update to clients on Thursday. Ezzat maintained a “Buy” rating on the stock and $45.00 target price, which at press time implied a one-year return of 59.6 per cent.

Montreal-based Tecsys, whose supply chain management solutions are taken up by companies in the healthcare industry along with high-volume distributors of discrete goods and third-party logistics providers, announced its third quarter fiscal 2023 financials on Wednesday for the period ended January 31, 2023. 

The company posted total revenue of $38.9 million, up 9.9 per cent year-over-year, and adjusted EBITDA of $2.8 million, up 1.3 per cent year-over-year. The company’s annual recurring revenue was up 26.6 per cent to $75.4 million, while SaaS-based revenue rose 36 per cent to $9.5 million and now representing 24.5 per cent of the company’s recurring revenues.

“We continue to see healthy pipeline activity that shows a growing demand for our value proposition to our base customers and to the supply chain market as a whole. In light of these favourable market conditions, we continue to invest to drive organic growth,” said President and CEO Peter Brereton in a press release.


Looking at the numbers, Ezzat said the $38.9 million topline was above both his estimate at $37.8 million and the consensus forecast at $37.1 million, while adjusted EBITDA at $2.8 million was also above his call at $1.8 million and the Street at $1.9 million.

Ezzat said Tecsys’ annual recurring revenue continues to grow at a healthy clip, while the company’s balance sheet remains in great shape. Tecsys has no debt and net cash of $27.9 million.

“The Company cleaned up its balance sheet paying off all long-term debt resulting in a net cash position of $27.9 million versus $34.0 million last quarter. We anticipate margins will remain subdued over the next few quarters as the Company continues to reinvest in its business to drive growth. We are maintaining our Buy rating and $45.00/shr target price,” Ezzat wrote.

Further out, Ezzat is calling for full fiscal 2023 revenue and EBITDA of $148.4 million and $8.7 million, respectively, and for fiscal 2024 revenue and EBITDA of $165.7 million and $13.7 million, respectively. 

At a market cap of about $410 million, Tecsys shares jumped almost six per cent on Thursday after the quarterly announcement, but the stock remains at about half the value of its highs set in late 2021.

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