Quisitive Technology Solutions is a Buy, says Eight Capital

With multiple market opportunities for its business and an attractive-looking valuation, Eight Capital analyst Christian Sgro is staying bullish on Quisitive Technology Solutions (Quisitive Technology Solutions Stock Quote, Charts, News, Analysts, Financials TSXV:QUIS). 

Sgro provided an update to clients on Thursday where he reiterated a “Buy” rating on QUIS and 12-month target of C$1.50 per share, which at press time represented a projected return of 266 per cent.

Quisitive is a Microsoft partner with custom solutions and first-party offerings in Cloud Solutions for enterprise-level businesses and Payments Solutions through its PayiQ platform.

The company recently held an investor day at the Microsoft Technology Center in Toronto, hosted by Quisitive CEO Mike Reinhart and with Eight Capital in attendance. Sgro said the conversation focused on the opportunity in services, particularly in healthcare, for Quisitive’s IP and in the payments space.

“All in all, we left the event positive that the company is building momentum and executing on plan in both key segments,” Sgro wrote.

On the healthcare side, Sgro related that the still-siloed market is replete with regulatory barriers and data is dispersed across payers and providers, making for a scenario ripe for innovation through, for example, Quisitive’s integration solutions on the secure Microsoft Azure platform.

On the payments side, Sgro said Quisitive reps spoke of how cloud-based payment processing offers benefits such as increased deploymet speeds during onboarding, improved integrations and scalability. 

“Legacy players have significant technical debt and complex platforms, creating inertia and a reluctance to migrate to a more modern cloud architecture – an opportunity for PayiQ,” he said.

Quisitive last reported its earnings in May, where the company’s first quarter saw revenue climb eight per cent year-over-year to $48.3 million and adjusted EBITDA up ten per cent to $7.0 million. 

The company said it secured a number of major new contracts over the quarter for its Spyglass security solution including municipalities and enterprise retailers.

“Our first quarter showcased the benefit of our dual-pronged business as sequential and year-over-year top line revenue growth driven by the strength in our Global Payments Solutions division,” said Reinhart in a press release.

Quisitive’s share price has had a dramatic plunge over the past two years, shedding about 75 per cent of its value over that time span. But Sgro sees the drop as a buying opportunity and thinks the stock offers “deep value” at current levels.

“We see $5 million+ of quarterly gross operating cash flows supporting the valuation. Discretionary PayiQ investment is currently a drag on margins, which we ultimately see as upside optionality as the revenue opportunity materializes and margins normalize. We think the 5.1x 2024E EV/adj. EBITDA is attractive in the context of ITSP peers and considering ~30 per cent of revenues are driven by a higher value payments segment,” he said.