The share price for kneat.com (kneat.com Stock Quote, Charts, News, Analysts, Financials TSX:KSI) has been travelling sideways for over a year, but the company keeps racking up contract wins, including a recent Master Services Agreement (MSA) with one of the top 20 contract development and manufacturing organizations (CDMO) in the world.
It’s that type of progress that’s keeping Echelon Capital Markets analyst Rob Goff bullish on the stock. Goff provided an update to clients on Wednesday where he reiterated a “Speculative Buy” rating and $4.20 target price on the stock, saying more and more wins show how kneat’s platform has become a go-to standard for compliance and validation software.
“We remain bullish about the Company’s organic growth as it completes its transition to a SaaS model. We believe KSI represents an attractive investment valued at 6.7x 2023 revenues and 10.6x EV/Gross Profits in the context of larger, slower growth peers Veeva Systems at 11.8x revenues and 16.2x EV/Gross Profits, and Aspen Technology, Inc at 12.0x revenues and 15.4x EV/Gross Profits,” Goff wrote.
A Canadian company with operational headquarters in Limerick, Ireland, kneat on Monday announced signing the MSA with a top 20 CDMO, saying the agreement is effective immediately, does not expire and allows the company to scale kneat across all of its business divisions and affiliates. Kneat said the global provider has 20,000 employees and over 100 facilities and a market size of US$160 billion in 2028 with an expected CAGR of ten per cent.
“Today’s win affirms the progress we are making consolidating our leadership in validation for the life science space. We expect that more companies in the supply chain will look to benefit from the Kneat platform, which is proving to be an invaluable tool for automating processes that value data integrity,” said kneat CEO Eddie Ryan in a statement.
Goff is calling for kneat to generate full 2023 revenue of $34.0 million, good for a 44 per cent year-over-year increase and EBITDA of negative $4.9 million. For 2024, Goff is estimating $47.9 million in revenue and EBITDA of positive $0.7 million. At press time, Goff’s $4.20 target represented a projected one-year return of 63 per cent.
“KSI continues to highlight that full deployment across its current SaaS clients would support baseline revenues in excess of $50 million. We look for the $50 million benchmark to be increased reflecting new contract wins. We are optimistic that KSI will move to a target of $100 million in two years with the inclusion of adjacent markets where services are being developed. KSI puts its TAM at $700 million before allowing for adjacent markets where it has seen initial wins and where current R&D expenditures will broaden its service applications,” Goff said.