Quarterhill is a buy, this bank says

Roth Capital Partners analyst Scott Searle says Quarterhill (Quarterhill Stock Quote, Chart, News, Analysts, Financials TSX:QTRH) is positioned to return to growth as demand for AI-driven intelligent transportation systems increases.

In a July 13 report, Searle initiated coverage of Toronto-based Quarterhill with a “Buy” rating and $7.25 target.

Quarterhill provides intelligent tolling, enforcement and logistics infrastructure technology. Searle said the company is entering the third phase of its turnaround, with organic growth and M&A expected to follow recent improvements to margins and profitability.

The global intelligent transportation systems market is worth more than $50-billion and is expected to grow as urbanization, congestion and aging infrastructure drive demand for more efficient road and traffic systems. Searle said AI, sensors, cameras and communications technology should support more data-driven models for safety, compliance and predictive analytics.

Searle said Quarterhill has a current portfolio that addresses about 30% of the ITS market, with about 90% of sales concentrated in North America.

Quarterhill generates about 60% of revenue from intelligent tolling and is expanding in safety and enforcement. Searle said the company has more than 1,100 lanes in service, generating more than two billion annual data points that can support AI-driven products, higher customer value and more recurring revenue.

The analyst said management has improved the company’s financial profile over the past two years by renegotiating unprofitable legacy contracts and focusing on higher-margin software opportunities. Gross margins have improved by 1,600 basis points, while Adjusted EBITDA has turned positive.

Searle said Quarterhill has re-engaged with customers and is positioned to return to growth in the second half of 2026, supported by a $429-million backlog and a qualified pipeline of more than $2-billion before the Conduent transaction.

He said the planned acquisition of Conduent’s tolling operations is transformative, tripling Quarterhill’s North American tolling presence and adding an expected $25-million to $40-million of Adjusted EBITDA. Searle said it should also add 10 cents to 20 cents to 2027 EPS.

Searle said Quarterhill trades at about 1.3 times his fiscal 2027 EV/sales estimate, or less than one times including Conduent, below intelligent transportation peers at two to four times.

He expects Quarterhill to generate Adjusted EBITDA of $12.1-million on revenue of $167.0-million in fiscal 2026, improving to Adjusted EBITDA of $21.7-million on revenue of $184.5-million in fiscal 2027.

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