Pivotree is a buy, Paradigm Capital says

Following the company’s fourth quarter results, Paradigm Capital analyst Daniel Rosenberg has maintained his “Buy” rating on Pivotree (Pivotree Stock Quote, Chart, News, Analysts, Financials TSXV:PVT).

On March 27, Pivotree reported its Q4 and fiscal 2024 results. In the fourth quarter, the company posted Adjusted EBITDA of $1.7-million on revenue of $18.2-million.

Rosenberg summarized the quarter.

“Pivotree reported Q4 results with improvements to profitability owing to cost controls despite softness in the top line,” he wrote. “Revenue declines from legacy managed services continue to drag on growth, but we are starting to see green shoots. Bookings for managed IP solutions saw a 76% y/y growth, pointing to early signs of momentum in PVT’s new offerings. Prior restructuring efforts allowed for a notable improvement in EBITDA, which management expects to persist. The outlook was cautiously optimistic, with management highlighting a good foundation for PVT to focus on growth this year.”

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In a research update to clients March 28, Rosenberg maintained his “Buy” rating and price target of $2.75 on PVT, implying a return of 175% at the time of publication.

The analyst thinks the company will post Adjusted EBITDA of $5.5-million on revenue of $73.0-million in fiscal 2025. He expects Adjusted EBITDA of $5.6-million on revenue of $74.5-million in fiscal 2026.

“We value Pivotree using a blend of EV/sales multiple and DCF. We apply 1.3x multiple to our 2026 estimates for managed services revenue and 0.8x to professional services,” Rosenberg added. “Our DCF uses a WACC of 10.6% and terminal exit EBITDA multiple of 13.0x. The blended valuation results in our $2.75 target price. PVT trades at 0.3x 2026 EV/Sales (vs. peers at 2.8x). We continue to see progress with Pivotree’s transition and are optimistic for a more constructive year.”