This unknown Canadian tech stock is a buy, analyst says

In a March 26 report, Ventum Capital Markets analyst Amr Ezzat maintained his “Buy” rating on Computer Modelling Group (Computer Modelling Group Stock Quote, Chart, News, Analysts, Financials TSX:CMG) and raised his target price to C$6.75 from C$6.50 after the company announced the acquisition of Rose Subsurface Assessment, a Houston-based provider of probabilistic subsurface risk analysis software, training and consortium services.

Ezzat said the US$9.8-million upfront deal, with a potential earn-out of up to US$2.5-million, looks strategically coherent because it pushes CMG further upstream in the exploration and production workflow. Rose generated about US$6.8-million in trailing-12-month revenue, more than half of it recurring, implying a purchase multiple of about 1.4x sales, or roughly 1.8x including the earn-out. On a pro forma basis, he said the acquisition adds about 7% to 8% to CMG’s roughly $125-million revenue base.

Ezzat said the deal fits CMG’s broader M&A playbook of buying technically adjacent, recurring-revenue assets at reasonable valuations. He said Rose fills a front-end gap in CMG’s growing subsurface software stack, extending the company’s workflow from risk assessment through seismic data and AI, interpretation and reservoir simulation.

“While modest in size, this is a strategically coherent move,” Ezzat said. “Rose expands CMG further upstream in the E&P workflow, filling a gap at the front end of its subsurface software stack.”

He also highlighted Rose’s consortium structure as a key differentiator, noting that some of its operator consortiums have run for more than 20 years and include more than 30 members contributing data and participating in benchmarking exercises. In Ezzat’s view, that creates a sticky, institutional revenue base and a proprietary calibration dataset built over decades. He said that makes Rose more than a typical consulting business and gives CMG a more durable platform for monetization over time.

On valuation, Ezzat said the acquisition is being completed at a discount to CMG’s own trading multiple of roughly 2.2x sales, suggesting revenue accretion from day one. While profitability metrics were not disclosed, he estimated Rose’s EBITDA margins are likely in the mid-teens, broadly in line with the entry point for prior acquisitions. He said the larger opportunity is in mix shift, as training and consulting relationships move toward higher-margin software adoption and create room for margin expansion over time.

Ezzat said Rose’s approximately $9.3-million in revenue is financially small but strategically additive, with the upfront consideration representing less than five per cent of CMG’s market capitalization. He added that CMG exited the third quarter of fiscal 2026 with about $23.7-million in cash and an undrawn $100-million credit facility, leaving the balance sheet in a position to continue executing on acquisitions.

He said the transaction reinforces CMG’s M&A narrative, but is not the main near-term catalyst for the stock. Instead, he pointed to the expected Shell transition at the end of Q4/F26 as the more important event, with the potential to drive a step-change in recurring revenue and margins.

“Near term, the impact is modest, and there may be some margin dilution given the likely starting profile of the business,” Ezzat said. “Longer term, the opportunity is more compelling.”

For fiscal 2027, Ezzat said he is increasing his revenue estimate by about $10.0-million and his EBITDA estimate by about $1.5-million to reflect the contribution from Rose, while arguing that this likely represents only a baseline contribution because the upside from cross-selling and higher-margin software adoption is not yet fully captured in his forecasts.

Ezzat said that CMG should post $34.6-million in Adjusted EBITDA on revenue of $124.9-million in fiscal 2026. he said those numbers will improve/deteriorate to $36.3-million on revenue of $134.2-million in fiscal 2027.

Computer Modelling Group, incorporated in 1996 and headquartered in Calgary, develops and licenses reservoir simulation software used by oil and gas producers to improve hydrocarbon recovery. The company has about 550 clients in 60 countries and approximately 300 employees.

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