This Canadian tech stock is “remarkably inexpensive,” analyst says

Beacon Securities analyst Doug Cooper says NTG Clarity Networks’ (NTG Clarity Networks Stock Quote, Chart, News, Analysts, Financials TSXV:NCI) valuation is “remarkably inexpensive,” but the company needs to show an EBITDA turnaround after several quarters of year-over-year declines.

In a June 1 update, Cooper reiterated his “Buy rating and $2.75 target. He noted that NTG’s first-quarter fiscal 2026 results showed revenue of $21.3-million, gross margin of 33.6% and EBITDA of $760,000, compared with revenue of $19.7-million, gross margin of 34.8% and EBITDA of $2.9-million a year earlier.

Cooper said the quarter marked NTG’s 11th consecutive quarter of year-over-year revenue growth, with sales up about 100% over the past two years, all organic. But it was also the fourth straight quarter of year-over-year EBITDA declines, a trend that he said has weighed heavily on the stock.

Since the first EBITDA decline appeared in the company’s Q2 fiscal 2025 results, Cooper said NTG’s share price has fallen from about $3.25 to a recent low of $0.72. Over that same period, its trailing EBITDA multiple has compressed to 3.1 times from 13.1 times.

Cooper added that the company’s reaffirmed fiscal 2026 guidance of more than $90-million in revenue and a 13% to 16% EBITDA margin implies a significant improvement through the rest of the year. To meet that outlook, NTG would need average quarterly revenue of about $23-million and average quarterly EBITDA of about $3.7-million from Q2 through Q4.

Because NTG has a high fixed-cost base, primarily tied to headcount, Cooper said incremental revenue should generate strong operating leverage. He said Q2 revenue above $23-million could potentially translate into about $3-million of EBITDA, which would mark NTG’s first year-over-year EBITDA increase in six quarters.

“One expense we continue to watch is salaries and benefits as this is the largest single expense item and one that has seen significant acceleration over the past year in anticipation of future contracts,” Cooper said.

Salaries and benefits were $14.4-million in Q1 fiscal 2026, up from $12.0-million in Q2 fiscal 2025, making that expense line the key current drag on earnings.

“If those headcount assets do not become more productive in the coming quarters (and starting in Q2/FY26), we would like to see the company start a reduction in that expense line item,” he said.

Other potential catalysts include contract wins that push book-to-bill above one, growth in the company’s roughly $73-million backlog, a permanent resolution to the war in the Middle East, continued improvement in days sales outstanding and the launch of a share buyback.

The analyst said trade receivables improved to $14.6-million in Q1 fiscal 2026, with only 0.6% more than 91 days overdue, compared with $18.7-million and 6.2% over 91 days in Q2 fiscal 2025.

Cooper said that if NTG comes close to its fiscal 2026 guidance, the stock trades at 0.4 times sales, 2.7 times EBITDA and 4.5 times earnings. It also trades at 1.4 times working capital.

“Ultimately, we believe NTG’s strategic position within the Saudi IT market continues to grow, specifically as seen by its existing customers giving the company larger contracts,” Cooper said. “Furthermore, we believe The Kingdom will continue along its path of the diversification of its economy from its dominant oil and gas industry. At $0.77, the market is not pricing any such positive factors into the current stock price.”

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