Real Matters is an undervalued stock, ATB says

Ahead of the company’s first quarter results, ATB Capital analyst Martin Toner has maintained his “Buy” rating on Real Matters (Real Matters Stock Quote, Chart, News, Analysts, Financials TSX:REAL).

On January 30, before the market open, REAL will post its Q1, 2025 results. The analyst laid out his expectations.

“We expect consolidated revenue of $36.0mm to decline 15% y/y, below consensus of $40.8mm. We expect the y/y decline in consolidated revenues to be a result of higher rates and more subdued re-financing activity over the quarter, alongside weak seasonality,” he wrote. “Accordingly, our net revenue expectation of $9.5mm (reflecting a 15% y/y decline) is below consensus of $11.1mm, and we estimate a net revenue margin of 26.5% to be flat y/y. Our adj. EBITDA estimate of a $1.3mm loss is below consensus of a $0.8mm loss and is relative to adj. EBITDA of $0.6mm last quarter. Despite volatility in rates throughout the year, REAL has reported three consecutive quarters of positive adjusted EBITDA, which we think is reflective of a right-sized cost structure and operating leverage in the business. We will look for a positive surprise on that front, which could boost investor confidence around REAL’s positioning heading into a potential market recovery. We will also be keeping an eye on indications of new lender wins in Title, as this would imply additions of incremental EBITDA at any volume level by 2026.”

In a research update to clients January 28th, Toner maintained his “Outperform” rating and price target of $11.00 on REAL, implying a return of 58.7%.

The analyst thinks REAL will post Adjusted EBITDA of $6.3-million on revenue of $186.5-million in fiscal 2025. He expects those numbers will improve to Adjusted EBITDA of $79.6-million on revenue of $276.0-million in fiscal 2026.

“Our price target represents a 58.7% return to target, and is based on our discounted cash flow (DCF) valuation, using an 11.5% discount rate and 2.5% terminal growth rate (both unchanged), Toner added. “Our discounted terminal value of $312mm represents 57.7% of total enterprise value (EV) of $541.4mm, as well as an 8.4x EV/EBITDA multiple, and a 1.2 EV/Revenue multiple.”