Real Matters has price target cut to $7.00 at National Bank

Following the company’s fourth quarter results, National Bank Financial analyst Richard Tse has lowered his price target on Real Matters (Real Matters Stock Quote, Chart, News, Analysts, Financials TSX:REAL).

On November 21, REAL reported its Q4, 2024 results. The company posted Adjusted EBITDA of $600,000 on revenue of $45.6-million, a topline that was up 8%, year-over-year.

“Heading into fiscal 2025, we are optimistic about the potential for growth as pent-up demand continues to build,” CEO Brian Lang said. “Today, there are eight million outstanding mortgages with interest rates above 6% which represents a significant pool of potential refinance candidates. According to our Future Plans of Homeowners Survey, 40% of future buyers plan to buy a primary home when rates decline. These tailwinds, coupled with our market leadership in appraisal and the significant potential for expanding our U.S. Title business, position us well for growth. We continue to maintain a readiness posture to flex the business based on market dynamics and lender positioning. As we drive more transaction volumes on our platform, we expect to expand our margins and profitability in line with our long-term operating model.”

Tse summarized where the company is at right now.

“With respect to the notable highlights in the quarter, Real Matters gained share with three of its top U.S. Appraisal clients on a Y/Y basis while launching three new clients in U.S.,” he said. “T&C (one of which is a Tier 2 lender). In Canada, the Company also launched an additional three new clients and one new channel. And with respect to the next leg of growth market of T&C, Real Matters noted it’s waiting on a completed RFP with a Tier 1 lender that should be awarded over the coming weeks (by CY24 end) with another RFP in the process that could be awarded in CQ1’25 (FQ2’25). Of note, Real Matters currently has one Tier 1 lending partner in T&C and adding another would approximately double the existing Tier 1 volume / revenue.”

In a research update to clients November 21, Tse maintained his “Sector Perform” rating but lowered his price target on REAL from $9.00 to $7.00, implying a return of 8.4% at the time of publication.

The analyst thinks the company will post Adjusted EBITDA of $10.4-million on revenue of $212.2-million in fiscal 2025. He expects those numbers will improve to Adjusted EBITDA of $18.4-million on a topline of $252.2-million in fiscal 2026.

“All in, despite some growing optimism, market volumes have yet to fully turn given in part to some uncertainty around rates,” Tse added. “We’re maintaining our Sector Perform rating and lowering our target price to C$7.00 (was C$9.00) following our (notably lower) forecast revisions (Figure 2) following this morning’s results and Management’s commentary. Our revised DCF-based target price implies an EV/Net Sales valuation of 5.4x on our FY25E (was 7.1x).”