On today’s Breakouts report, there are 37 stocks on the positive breakouts list (stocks with positive price momentum), and 16 stocks are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that may resurface on the positive breakouts list in the upcoming months.
Year-to-date, the share price is already up nearly 40 per cent and potential near-term catalysts may boost the share price and give investors another year of triple-digit gains. In 2020, the share price rallied 340 per cent. The stock has a unanimous buy call from six analysts with expected one-year returns ranging from 31 per cent to 80 per cent (average expected one-year return is 53 per cent).
The stock discussed today is Quisitive Technology Solutions Inc. (QUIS-X).
A brief outline is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.
With its head office in Toronto and its principal U.S. headquarters in Irving, Texas, Quisitive is a rapidly evolving company.
The company has two main business segments– its cloud solutions business and its payment solutions business.
First, Quisitive is a Microsoft National Solution Provider and as such it provides consulting services to help companies migrate and use Microsoft cloud services. Second, the company’s LedgerPay platform is expected to accelerate later this year. This business segment provides cloud-based payment processing and data intelligence aimed at enhancing customer loyalty for retailers.
When the company reports its second-quarter 2021 financial results, greater granularity will be provided with the company separating its revenue into these two core business segments.
Quarterly earnings results
On April 20, the company reported solid fourth-quarter financial results along with positive guidance that sent the share price soaring 9 per cent that day.
Revenue came in at $13.1-million, in-line with the consensus estimate, and up 142 per cent year-over-year. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $2.2-million, just above the consensus estimate of $2.1-million, and up from $0.3-million reported during the same period last year.
Management provided a bullish outlook for the company in the near-term as well as further out.
On the earnings call, chief executive officer, chairman and founder Mike Reinhart said, “The second half of this year is when I believe we’ll begin to recognize the fruits of our labor”. This growth is expected to be driven by the company’s rollout of LedgerPay, its fintech, payment processing platform. He added, “As I look towards the future, over the next three to five years, we envision Quisitive as a $250-million revenue business with $100- million in EBITDA.” The CEO envisions that 60 per cent or more of this future revenue will be from the company’s payments-based platform.
Management continues to actively seek out strategic acquisition opportunities. The company has a solid balance sheet providing it with the financial flexibility to fund additional acquisitions. On April 8, the company completed $62.6-million in financings. In addition, the company increased its debt facility by $50-million.
Mr. Reinhart said: “We remain focused on growing the business organically while also acquiring cloud technology services company to continue to expand our capabilities. We have active conversations with several additional cloud solutions companies and expect to do at least one additional acquisition in the second half of this year. In the payment solutions space, we will continue to acquire merchant portfolios through additional ISO [independent sales organization] companies going forward. As mentioned previously, we have the M&A [merger and acquisition] advisers who have engaged to help us build target pipeline and expect to complete the next acquisition later this year.”
- Near-term catalysts: 1) An upcoming announcement of bank sponsorship for direct payment processing of Visa, MasterCard and other major credit and debit cards. 2) rollout of LedgerPay 3) New customer wins.
- Robust growth profile. Driven by transformative acquisitions.
- Rising profitability. Expected synergies realized from the recently announced acquisitions of Mazik Global Inc. (completed on April 1) and BankCard USA Merchant Services Inc. (announced on March 29 and soon to be completed).
- Organic as well as acquisition growth. For instance, management continues to target between 15 per cent and 20 per cent organic, or internal, growth from its clould solutions business segment and even higher organic growth from LedgerPay, its payment processing business.
Management is focused on growing its operations. As a result, the company currently does not pay its shareholders a dividend.
There are six analysts covering this small-cap tech stock with a market capitalization of $388-million.
Four analysts buy recommendations and two analysts have “speculative buy” recommendations.
The firms providing research coverage on the company are: Beacon Securities, Canaccord Genuity, Desjardins Securities, Echelon Wealth Partners, Eight Capital, and Raymond James.
In April, four analysts raised their target prices.
- Raymond James’ Stephen Boland to $2 from $1.80.
- Desjardins Securities’ Kevin Krishnaratne to $2.50 from $1.90.
- Beacon Securities’ Gabriel Leung to $2 from $1.70.
- Echelon Wealth Partners’ Robert Goff to $2.75 (the high on the Street) from $2.20.
The Street is forecasting revenue of $107.8-million in 2021, up from $49.8-million reported in 2020, and expected to jump to $147.7-million in 2022. Adjusted EBITDA is anticipated to come in at $20.9-million in 2021, up from $8.1-million reported in 2020, and expected to rise to $35.9-million in 2022. The consensus earnings per share estimates are 2 cents in 2021 and 5 cents in 2022.
Earnings forecasts are rising due to the recently announced acquisitions. To illustrate, three months ago, the consensus revenue estimates were $70.9-million in 2021 and $106.9-million in 2022. The adjusted EBITDA estimates were $11.4-million for 2021 and $19.4-million for 2022.
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 11 times the 2022 consensus estimate.
The average one-year target price is $2.34, implying there is 53 per cent upside potential in the share price over the next 12 months. However, target prices vary widely, suggesting potential one-year returns of between 31 per cent and 80 per cent. Individual target prices are as follows in numerical order: two at $2, $2.30, two at $2.50 and $2.75.
Year-to-date, there has not been any trading activity in the public market reported by insiders.
The stock has a limited trading history. Through a reverse take-over, shares of Quisitive resumed trading on the TSX Venture Exchange on Aug. 13, 2018. Consequently, technical analysis is constrained.
Year-to-date, the share price is up 39 per cent. In 2020, the stock price rallied 340 per cent to $1.10 from 25 cents.
In terms of key resistance and support levels, the share price has initial overhead resistance between $1.70 and $1.75, close to its record closing high of $1.67 set on March 23 and its intraday high of $1.75 reached on Feb. 16. Looking at the downside, there is initial technical support around $1.50, at its 50-day moving average. Failing that, there is technical support around $1.20.
Liquidity for this small-cap stock can be relatively low, which can increase price volatility. On April 30, just over 82,000 shares traded. The three-month historical daily average trading volume is approximately 460,000 shares.
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.
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