Is Computer Modelling Group stock a buy?

Ventum Capital Markets analyst Amr Ezzat maintained a “Buy” rating and C$7.50 price target on Computer Modelling Group (Computer Modelling Group Stock Quote, Chart, News, Analysts, Financials TSX:CMG) ahead of the company’s third-quarter fiscal 2026 results, due after market close on Feb. 10. CMG does not host conference calls.

Ezzat expects the quarter to underscore margin normalization during what he characterizes as a transition year, ahead of a more visible recurring-revenue inflection beginning in the fourth quarter. He is forecasting Q3/F26 revenue of $33.2-million and Adjusted EBITDA of $11.3-million, implying a 34% margin, compared with Street expectations of $34.4-million and $10.6-million.

“Q3 should mark an important step forward in CMG’s transition year,” Ezzat said in his Feb. 9 report. “While revenue remains pressured by the continued wind-down of Professional Services and the lingering impact of a lost top-10 R&P customer, the mix continues to improve meaningfully. Seasonal strength, license renewals, and early operating leverage should drive a sharp sequential recovery in profitability.”

He expects progress across three areas: continued migration toward higher-quality recurring revenue, margin recovery driven by mix and seasonality, and improving visibility into the Shell commercial licensing agreement, which is expected to begin contributing to annual recurring revenue in Q4/F26.

By segment, Ezzat is modelling annuity and maintenance revenue of $19.5-million, down 4.4% year over year, with stabilization supported by easing churn and partial offsets from seismic-related contributions. Annuity license fees are forecast at $5.4-million, up 25%, reflecting renewal timing and traction across acquired platforms. Professional Services revenue is expected to decline 29% to $7.3-million, driven by the deliberate runoff of CoFlow-related services and non-core Bluware activity, while perpetual licence revenue is forecast at $1.0-million, up 24.4%.

Ezzat said the implied 34% EBITDA margin compares favourably with the Street’s 31% and supports his view that margins have already troughed.

He described the upcoming Q3 as a “bridge quarter” before several structural tailwinds emerge more clearly in Q4, including contributions from the Shell licensing agreement, a return to organic recurring revenue growth, and increased benefits from recent seismic acquisitions.

For context, CMG’s Q2/F26 results exceeded expectations, with revenue of $30.2-million and Adjusted EBITDA of $7.6-million, though margins remained under pressure year over year due to mix and transition costs.

On the full-year outlook, Ezzat reiterated management’s expectation for a stronger second half of fiscal 2026, with sequential improvements in both Adjusted EBITDA and free cash flow, and organic recurring revenue returning to positive growth in Q4. Management is targeting positive full-year organic recurring growth in fiscal 2027.

Ezzat said Computer Modelling Group should generate approximately $37.0-million in Adjusted EBITDA on revenue of $125.9-million in fiscal 2026, improving to about $45.5-million in Adjusted EBITDA on revenue of $127.2-million in fiscal 2027.

-30-