National Bank of Canada analyst Richard Tse still thinks there’s a spark to E Automotive Inc (E Automotive Stock Quote, Chart, News TSX:EINC), maintaining an “Outperform” rating and target price of $21.50/share for a potential return of 59.4 per cent in an update to clients on Wednesday. Toronto-based E Automotive, which operates as E INC, provides a digital platform for dealers to access an online wholesale auction marketplace, with its Digital Wholesale Marketplace platform providing dealers with access to a market that includes online wholesale vehicle auctions connecting buyers and sellers. Its Digital Retail platform enables dealers to track vehicle inventory and make their inventory available in their digital showroom, on their website and through other third-party consumer facing online properties. Tse’s latest analysis comes after E INC released fourth quarter financial results along with its 2021 year-end figures. “We would note that management pointed to abnormally high demand in the quarter due to the continued volatility in the auto market,” Tse said. “That said, even with that benefit we see the Company executing (in the early days) of its growth plan.” E INC’s fourth quarter was headlined by revenue of $23.1 million, good for a 149 per cent year-over-year increase while also producing a beat in relation to the National Bank estimate of $17.6 million and the consensus projection of $18 million. The company’s Auction Revenue went up 175 per cent in the quarter on a year-over-year basis, reporting at $12.5 million compared to the NBF estimate of $9.6 million. Meanwhile, the company’s Ancillary Revenue came in at $7.4 million, ahead of the NBF estimate of $4.6 million. On earnings, the company reported an adjusted EBITDA loss of $5.5 million, a miss compared to the $3.9 million loss projected by National Bank and the $4 million loss projected by the consensus. Tse attributed the loss to a lower gross margin of 42.7 per cent compared to the NBF projection of 44.8 per cent, the result being a byproduct of a shift in the company’s revenue mix towards lower-margin ancillary services such as Assurance & Transportation, as well as higher than expected SG&A costs of $15.8 million compared to the NBF estimate of $11.2 million. "Our results to date are primarily driven by our leading position in the Canadian market and our competitive position in the western U.S. wholesale markets,” said Jason McClenahan, President and CEO of E INC in the company’s March 22 press release. “We have the technology, the team and the strategy to replicate our success in Canada in the U.S. market as auto dealers search for intuitive, easy to use platforms that support their profitability through innovative inventory management." After the company wrapped up 2021 with $80 million in revenue, Tse forecasts the company breaking into nine figures in 2022 at an estimate of $107.1 million (previously forecast at $96.9 million) for a potential year-over-year increase of 33.9 per cent. Looking ahead to 2023, Tse forecasts a further jump to $136.4 million, implying a year-over-year increase of 27.4 per cent. From a valuation perspective, Tse forecasts the company’s EV/Sales multiple to drop from the reported 4.4x in 2021 to 3.3x in 2022, then to a projected 2.6x in 2023. Meanwhile, after E INC reported a $7.9 million adjusted EBITDA loss in 2021, Tse projects the losses to continue at a projected $15.1 million in 2022, followed by a $15.5 million loss projection for 2023. Overall, Tse believes the company is tracking toward the initial investment thesis laid out previously, with opportunities potentially in the future given that half of E INC’s overall market is served by small, independent players. “We believe E INC remains at the forefront of a digital transformation in the automotive market,” Tse said. “As a recap, its primary platform under its EBlock brand allows dealers to purchase and sell used vehicles via a virtual wholesale auction environment while its EDealer brand provides software for dealers to manage their operations (i.e., inventory management). In our view, the primary valuation driver for E INC will come from the Company’s execution of its strategy to scale EBlock.” E Automotive’s stock price is down 46.4 per cent since it began trading on the Toronto Stock Exchange in November, with a drop of 30.8 per cent since the calendar switched to 2022. Upon the start of trading on November 3, the stock was at $23/share, but it has since dropped, hitting a low of $10.80/share on February 7.