This Canadian penny stock is undervalued, Leede Financial says

Improving profitability and cash flow at Nanalysis Scientific Corp. (Nanalysis Scientific Corp. Stock Quote, Chart, News, Analysts, Financials TSXV:NSCI) are giving Leede Financial analyst Douglas Loe more confidence in the company’s operating trajectory, even as sales of its core nuclear magnetic resonance systems remain below historical levels.

In an Aug. 24 report, Loe maintained a “Speculative Buy” rating and $0.40 target on the Alberta-based analytical instrumentation developer and service provider.

Nanalysis reported fiscal second-quarter revenue of $9.7-million and EBITDA of $0.86-million, representing an 8.9% margin. That compared with EBITDA of $0.29-million in the prior quarter and an EBITDA loss of $0.46-million a year earlier.

Loe said the sequential decline in reported revenue was misleading because the first quarter included a larger amount of low-margin flow-through inventory that had little impact on profitability.

NMR capital sales rose sequentially to $2.8-million from $2.2-million, though Loe noted they remain below historical quarterly levels. NMR equipment gross margin improved to 64.7%, up from 58.0% in the prior quarter and 61.1% a year earlier.

By contrast, Loe said the company’s security services business continues to weigh on the story. Gross margin in that segment was 12.5%, down from 19.2% in the first quarter, and he said its relatively weak profitability remains an anchor on valuation.

Cash flow improved, with operating cash flow before working capital reaching $1.05-million, compared with $0.12-million in the previous quarter and a loss a year earlier.

Loe’s investment thesis remains centred on growing adoption of Nanalysis’s 60MHz and 100MHz benchtop NMR systems in academic and corporate markets, combined with tighter cost control in the services business.

The analyst’s $0.40 target is based on fiscal 2028 forecasts, including $10.9-million in Adjusted EBITDA and fully diluted EPS of $0.032, assumptions he acknowledged are aggressive relative to the current run rate.

For fiscal 2026, Loe forecasts $4.4-million in Adjusted EBITDA on revenue of $41.9-million, improving to $8.3-million in Adjusted EBITDA on revenue of $46.0-million in fiscal 2027.

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