Small cap tech stocks continue to get hammered hard as we end the last full week of trading in February, and while the rotation away from higher-growth names has likely chopped down some stocks to a more reasonable valuation, the axe used on Canadian digital commerce solutions provider mdf commerce (mdf commerce Stock Quote, Charts, News, Analysts, Financials TSX:MDF) has taken way too many swings at the stock. That's according to Stephen Takacsy of Lester Asset Management, who says investors will want to take advantage of the pullback. “This is a core position for us that we started accumulating a couple of years ago and we really like the company,” said Takacsy, speaking on BNN Bloomberg on Friday. Montreal-based mdf commerce has a number of platforms offering procurement and publishing solutions for government as well as private clients, online marketplaces in verticals like the automotive, IT, consumer goods and electronics segments and software-as-a-service business solutions. With nine offices in North America, mdf has about 520 employees and currently sports a market cap of $175 million. The stock did well over the first stretch of the COVID-19 pandemic, rising 74 per cent over 2020, but over the past 12 months it’s been all downhill for MDF, going from a high of about $16.00 early last February to now just below the $4.00 mark. That’s too much of a drop, says Takacsy. “The whole tech space has gotten decimated, especially companies that were trading more based on a multiple to sales and that had low earnings,” he said. “mdf does make money, they do have EBITDA, but what happened to them is that they made a huge acquisition which we believe is going to pay off.” “ they issued an enormous amount of shares to pay for it — they bought a company called Periscope, which along with mdf are leaders in the US for e-procurement. So, their clients are governments like state governments that use their platform exclusively to match suppliers with government to bid on government contracts. And that is a really fast-growing business in the US because it's early days digitization.” Along with e-procurement, mdf’s e-commerce business has a number of big clients in names like Sobeys, IGA, Dollarama and Sports Experts. Takacsy said those contracts are gold for a company like mdf because they’re often long-term and high-margin. Late in 2020, mdf signed a major deal with international food company Aldi for mdf’s commerce solution Orckestra Commerce Cloud for Aldi’s 200-plus stores across the UK. Takacsy says taking on those contracts and working out the kinks with Periscope will “They have a lot of contracts on their plate, and so they’re busy on-boarding some of these larger new customers, and of course, they're feeling the pinch like everybody else in the IT space where they have to compete to hire new employees,” he said. “But the last results they came out with showed organic growth in every one of their segments, and if it wasn't for some accounting adjustments that they had to make on the Periscope acquisition they would have showed $2.5 million in additional EBITDA,” he said. “Those accounting adjustments are going to come to an end very shortly over the next few quarters and you'll see the bottom line really, really lift.” “The stock is really cheap in terms of its peers on a multiple to sales, so I think it's probably a really good time that to average down here,” he said. Earlier this month, mdf reported its third quarter fiscal 2022 results for the period ended December 31, 2021, showing revenue up 43 per cent year-over-year to $30.7 million and a EPS loss of $0.11 per share compared to a loss of $0.14 per share a year earlier. The Q3 was the first full quarter with Periscope’s business included, adding $7.7 million in revenue. mdf said its e-procurement platform generated $16.9 million of the quarterly revenue, up 105 per cent year-over-year, while its Unified Commerce platform was up a slimmer four per cent to $9.8 million and the company’s e-marketplaces platform brought in $4.0 million for the quarter, up about seven per cent. “$30.7 million is the highest revenue reported in a single quarter for mdf commerce, and this would have been $2.6 million higher had it not been for the acquisition accounting adjustment on Periscope deferred revenues,” said mdf commerce CEO Luc Filiatreault in a press release. “Our focus for the quarter was the integration of Periscope and we’re happy to report that efforts are on track: the combined leadership team is in place, early product integration has generated quick wins and the longer-term product roadmap is now confirmed. This performance was achieved despite considerable macro-economic challenges, including those caused by the Omicron wave of the COVID-19 pandemic,” he said.