Globe says Think Research kept at Speculative Buy https://www.theglobeandmail.com/investing/markets/inside-the-market/article-tuesdays-analyst-upgrades-and-downgrades-239/
Echelon Capital Markets analyst Rob Goff thinks Think Research Corp.’s “impressive” cost-cutting measures position it for a record fourth quarter and “strong base” into 2023.
On Monday, the Toronto-based digital health software solutions reported revenue of $18.4-million for its third-quarter, narrowly below both Mr. Goff’s $19.3-million forecast and the consensus estimate of $19.6-million. However, an EBITDA loss of $0.7-million was better than the projection of a loss of $1.0-million from the analyst and the Street.
Calling the results “solid,” Mr. Goff said he’s “encouraged that the Company is on the cusp of generating meaningful EBITDA cash flows exiting 2022, which should set a baseline for expectations heading into 2023.”
“Despite a seasonally softer top-line result, we’re encouraged by the Company’s focus on cost efficiencies and come away feeling more confident that Think can generate sustainably positive EBITDA cash flows from here on out,” he said. “While areas of the business have experienced considerable quarter-to-quarter variability in 2022 – especially considering the Company has highlighted its 85-per-cent-plus recurring or highly reoccurring revenues, with a further 10 per cent or more from Clinic360, where pent-up demand has pushed backlogs to two-years-plus – Think should be commended for its efforts and success in realizing substantial cost synergies and operating leverage. When comparing Think’s Q322 to a year ago, the Company has grown its gross profit $4.4-million (104 per cent) versus its cash operating expenses approximately $0.7-million (8 per cent). Going forward, we expect Think to continue delivering operating leverage by expanding its revenues with a seasonal recovery in clinical services and its SaaS data solutions, alongside a higher revenue base at BioPharma with the recent contract wins while keeping cost control in check. Questions still remain around a realistic organic growth rate on the Company’s leaner operations, but regardless, Think’s valuation is not reflecting its improved fundamental outlook and we would recommend investors consider a long-term position at these levels.”
Keeping a “speculative buy” recommendation for Think shares, he trimmed his target to 90 cents from $1.50. The average target is 61 cents.