Skip to main content

Having secured a dominant share in Canada, Calgary-based Solium Capital Inc. is now trying to convince the global market that its software is superior.

Solium is at a crucial phase of an international push, targeting bigger game with its cloud-based product, which helps companies manage their stock-based incentive programs.

New investors in the small-cap stock should expect a stretch of earnings volatility, beyond which lies much potential growth.

Story continues below advertisement

"What people don't realize is that this is a world-class software company," said Jason Donville, president of Donville Kent Asset Management, which owns shares of Solium. "I don't think anyone can touch them in terms of the quality of their product."

Solium's flagship application, Shareworks, enables the management of stock option and stock purchase programs. With about two-thirds of revenue coming from annual subscription fees, recurring revenue is high, lending some predictability to earnings.

Meanwhile, the platform allows plan participants to execute trades in real time, adding another stream of revenue from transaction fees.

Once marketed primarily to energy companies, Solium's product has long outgrown the oil patch. With about a 75-per-cent market share among TSX 100 companies, the company is increasingly seeking growth outside of Canada.

"Solium, we believe, is at the foothills of a large, global opportunity," Canaccord Genuity analyst Robert Young said in a recent note. "We believe Solium is in a unique competitive position with the only global [software as a service] solution for equity administration on a single platform."

Solium has its competitors, some of which provide services from the cloud, but none have a single global platform, Mr. Young said. Having localized offerings can add time and complexity, particularly for multinationals having to combine data from multiple systems country by country, he said.

But even if Solium's product is better, the "stickiness" of the business makes it difficult to steal away business from competitors. Building international market share has been slow, but steady, Mr. Donville said.

Story continues below advertisement

The primary focus of the expansion has been Australia, where the company said it finds itself "swamped" by opportunities.

In June, Solium announced a new contract with mining giant BHP Billiton Ltd., one of the Australia's biggest companies, and previously a client of Solium's competitor Computershare Ltd. "BHP Billiton is a large, global and complex organization and an excellent reference customer to showcase Solium's capabilities," Mr. Young said.

In Britain, meanwhile, Solium continues to benefit from a white-label partnership with Barclays. And in the United States, Solium recently added SpaceX to its client list. "SpaceX was a completely organic win on the back of an increasing profile," said Mr. Young, who rates Solium stock a "buy" at a target price of $9. The other analysts covering the stock rate have an average target of $9.21, representing a 29-per-cent premium over Wednesday's closing price of $7.13.

Still, the company remains little known outside of Canada.

And spending the money required to raise that global profile and secure future growth is weighing on financial results in the interim.

"You've got to be prepared to live with the lumpiness of their earnings profile," Mr. Donville said.

Story continues below advertisement

In November, the company reported third-quarter earnings that fell well short of analyst expectations. Investors might expect more of the same in near-term profits.

"We think the risks are heightened right now," said Ryan Modesto, managing partner at 5i Research. "You need to watch over the next two to three quarters to see if growth starts to come back."

But Mr. Donville said he sees any material pullback as a good opportunity to buy the dip on a high-growth stock.

"If you take a five-year view, any time this stock checks back 15 or 20 per cent, that's the time to buy it."

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter