MDF COMMERCE (MDF TSX) A beaten up undervalued technology stock with a potential catalyst.
MDF Commerce is an undervalued tech stock. It develops and manages e-commerce platforms for larger corporations such as Sobeys and Aldi, and also owns business-to-government platforms enabling suppliers to bid on government contracts which is called “e-procurement.” MDF is the leader in e-procurement in Canada and is also now the number one player in the U.S. with only a six per cent market share as the U.S. remains very fragmented. It recently announced some significant regional government wins in Arizona, Arkansas, and Hawaii, and has a robust pipeline of states that wish to digitize its procurement systems. Roughly 80 per cent of MDF’s sales are high-margin recurring revenue. The stock is dirt cheap and trades at just over one times revenue. The plan is to unlock value by selling off non-core businesses such as their e-commerce platforms and focusing on the higher multiple faster-growing e-procurement business. Based on recent multiples paid for e-procurement companies, MDF could be worth as much as $12 per share, triple what it’s trading at today at $3.50. Meanwhile, a U.S. fund noticed how cheap the stock is and has accumulated 12 per cent of the company over the past year.
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