Echelon Capital Markets analyst Rob Goff thinks EQ Inc (EQ Stock Quote, Chart, News, Analysts, Financials TSXV:EQ) continues to be on a solid path, as he reiterated a “Speculative Buy” rating for the company in an update to clients on Friday. But Goff also slightly lowered his target price from $2.15/share to $1.60/share on account of reduced forecast estimates, projecting a one-year return of 32 per cent. Founded in 1995 as Cyberplex and headquartered in Toronto, EQ Inc provides digital marketing services using real-time and advanced analytics to help businesses track and optimize their targeted campaigns. Goff’s updated analysis comes after EQ released its fourth quarter and year-end financial results for the 2021 fiscal year, with the quarterly report headlined by $4.2 million in revenue, matching the projection set out by both Echelon and the consensus while producing a 15.7 per cent year-over-year increase and sequential growth of 35.9 per cent. Advertising and other services proved to be the big revenue driver for EQ in the quarter, as its $3.1 million report beat the $2.7 million Echelon estimate and accounted for 73 per cent of the company’s revenue mix while also producing 28 per cent year-over-year growth and a sequential increase of 40.3 per cent. The remaining 27 per cent of the mix came from the company’s data revenue, which reported at $1.1 million to miss on the $1.5 million Echelon estimate despite a 13 per cent year-over-year increase, though Goff believes the data stream often goes underestimated, to the point where he expects data profit to overtake advertising profit by the end of 2022. “This view continues to underestimate the full importance of data where about 70 per cent of media buying, or advertising revenues, is associated with data analysis,” Goff said. “We continue to look for EQ to leverage its data analytics capabilities to build out its strategic insights and consumer programs beyond advertising. We look for these moves to emerge internally where EQ would see productization of proprietary data sets implemented through fully owned intellectual property data connectors and dashboards.” Gross profit came in slightly softer than expected at $1.7 million for a 40.3 per cent margin compared to the $2 million Echelon estimate with a 46.7 per cent margin, while the company’s $1.1 million adjusted EBITDA was in line with expectations. “We are very pleased with our growth and proud of our team for delivering exceptional results in 2021, capped off with our strongest quarterly and annual financial results in almost a decade”, said Geoffrey Rotstein, President and CEO of EQ Works in the company’s April 26 press release. “Our focus in 2021 was to build a pipeline of products and opportunities that delivered tangible value to our clients and could be delivered through a recurring revenue model. This was accomplished, and we are very excited about the impact our new products continue to deliver as the momentum continues into 2022. We have built incredible tools and solutions that leverage our proprietary data and technology, and can be incorporated into our SaaS model.” After EQ wrapped up 2021 with $12.1 million in revenue, Goff slightly lowered his forecast for 2022 from $19.8 million to $16.9 million (consensus estimate $17.5 million) for a potential year-over-year increase of 39.7 per cent. Looking ahead to 2023, Goff established a revenue estimate of $21.9 million for a potential year-over-year increase of 29.6 per cent. From a valuation perspective, Goff forecasts the company’s EV/Revenue multiple to drop from the reported 6.3x in 2021 to a projected 4.5x in 2022, then to a projected 3.5x in 2023. Meanwhile, gross profit for 2021 came in at $5 million, just short of Goff’s $5.2 million expectation and producing a 41.2 per cent margin. For 2022, Goff reduced his target from $8.7 million to $7.5 million for a potential margin of 44.2 per cent, while his projection for 2023 is set at $10.1 million for a 45.9 per cent margin. Goff maintains a relatively level EV/gross profit valuation multiple of 15.3x for 2021 and 2022, then drops it to a projected 7.6x for 2023. After posting a loss of $3.3 million (previously projected at a $3.1 million loss) for 2021 and projecting a $3.7 million loss in 2022 (previously projected at a $1.5 million loss), Goff forecasts a positive adjusted EBITDA turn of $1.1 million in 2023 for a margin of five per cent, paired with a newly-established EV/adjusted EBITDA multiple projection of 69.1x. EQ Inc’s stock price has gotten back into the black for 2022 with a 3.3 per cent return since the start of the year, with its Friday closing of $1.24/share representing a high point for the calendar year to date.