Is CMG stock a buy?

National Bank Financial analyst John Shao likes what he sees from Computer Modelling Group (Computer Modelling Group Stock Quote, Chart, News, Analysts, Financials TSX:CMG).

In a research update to clients May 31, the analyst maintained his “Outperform” rating but raised his price target on the stock from $12.50 to $14.00.

As reported in the Globe and Mail, Shao explained the reasoning behind the target raise, after meeting with management.

“We like CMG because it exhibits a set of unique attributes such as product leadership, high customer stickiness and strong financial metrics,” the analyst wrote. “During today’s meetings, we took away incremental attributes that further set CMG apart from other Tech names: 1. Short Sales Cycle and Flat Learning Curve. Unlike other software companies with long sales cycles ranging from 12 to 24 months, CMG’s sales cycle is relatively short (in some cases, as short as just 7 days) because its products are designed in a ‘ready-to-go’ state, and professionals in the space are already familiar with CMG’s products. In our view, this relatively short sales cycle and flat learning curve suggest the company could direct more resources towards upselling and thus increase its odds of wallet-share gains. 2. Sales and Customer Support Are Integrated. Within the Company, the support team and sales team are essentially one group supporting each other instead of being siloed functions. For instance, some of the pre-selling activities could be completed by the support personnel who already know the customers’ pain points.”

Shao said he sees one segment in particular that could produce outsized growth.

“On top of the solid fundamental business, M&A has the potential to grow CMG into a Tech platform company within the oil and gas sector,” he added.