Upgrade Believing it has “a strong growth potential accentuated by a solid management team,” Scotia Capital analyst Divya Goyal raised her rating for Softchoice Corp. (SFTC-T) to “sector outperform” from “sector perform” following a “solid” fourth quarter of 2021.
In its first fiscal earnings release since going public in June of 2021, the information technology services company reported profit of $86-million, adjusted EBITDA of $26.5-million and adjusted earnings per share of 27 cents, exceeding the Street’s forecasts by 13 per cent, 11 per cent and 17 per cent, respectively.
“Softchoice reported solid financial performance for Q4/21 and F2021 driven by strong growth across all solutions/sales channel,” said Ms. Goyal. “Management attributed the growth and strong performance to the company’s unique go-to-market approach and the significant investments made in sales and technical capabilities.
“Alongside the robust F2021 performance, management has provided updated F2022 outlook which primarily includes Gross Profit estimated at $320-million (approximately 11.5-per-cent growth over Fiscal 2021); Adjusted EBITDA as a percentage of GP estimated at 30-per-cent margin; Adjusted FCF Conversion of 90 per cent. As per our revised estimates, we expect the company to generate $2.1-billion in Gross Sales, netting down to $1-billion in Net Sales resulting in Gross Profit of $327-million, Adj. EBITDA of $97-million and Adj. EPS of $1.04 per share against fully diluted shares.”
Ms. Goyal said she was “highly satisfied with the company’s financial performance, management’s detailed business overview and the company’s continued focus on creating additional shareholder value.”
That led her to raise her target for its shares to $32 from $30. The average on the Street is $33.22.