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7
Quorum Information Technologies stock price could double again
Posted by: Gerry Wimmer
9/7/2015
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TOP IDEAS: The stock is up 100% and Quorum Information Technologies (TSXV: QIS) is just starting to get on the radar screen of small cap investors – Investorfile Target Reached.




Investorfile's share price accumulation target of $0.40 for Quorum Information Technologies was reached on August 17, 2015. For the record, we do not revise share price targets for our Investorfile Top Ideas – Small Cap Value Stocks. We have positioned our blog to be one of the first providers of a pragmatic perspective of a small cap company stock's potential worth, where there may be uncovered value that has been largely overlooked by the investment community.


There are very few TSX-Venture listed small cap stocks that are trading at their highs in 2015. But Quorum Information Technologies Inc. (TSXV: QIS - $0.40) is one of those select few stocks. The shares of this Company are up 100% since the Investorfile blog first profiled Quorum Information Technologies as one of its Top Ideas – Small Cap Value Stocks in 2014 (See: Quorum Information Technologies delivers value for auto dealerships and small cap investors).

Are we surprised that the stock price of Quorum Information Technologies has doubled during a bear market for small caps? Not really if you factor in the Company’s recent quarterly financial results. In Q2 of 2015, revenues were up 13% to $2.7 million, EBITDA up 40% to $605 thousand and net income grew to $370 thousand, which is equivalent to about $0.01 per share in earnings.

Quorum Information Technologies automates integrates and streamlines every department in an auto dealership with its advanced Dealership & Customer Relationship Management System (DMS) software products - XSELLERATOR™. Quorum's software offering goes well beyond traditional DMS systems because it has integrated customer relationship management (CRM) tools, measurable processes that can help auto dealerships generate more service revenue.

Today about 300 General Motors, Toyota, Chrysler, Subaru, Hyundai, KIA, NAPA and Bumper to Bumper dealerships throughout Canada and the USA utilize the Company’s XSELLERATOR™ software products. Once installed, Quorum earns recurring software support revenues (70-80% of total revenues) plus additional revenues for software integration and training.

Because Quorum Information Technologies' shares have doubled in value over the past 12 months, the question is, could the stock price double again?

Here are three reasons why it could:

  1. Improving operating leverage. By the end of 2014 the Company had reached a critical mass of auto dealerships that subscribe for its software products, leading to Quorum’s improved operating efficiencies. This year the efficiencies of scale have positively impacted bottom-line financial results. As it adds more auto dealership customers, Quorum’s operating leverage will continue to expand, thus increasing the rate of the Company’s profit growth.
  2. Gaining a bigger market share. Quorum could see a significant increase in its market share of dealerships which subscribe to the Company’s DMS software - XSELLERATOR™. The Company's software products were recently approved for use by Toyota dealerships in Canada, and Ford/Lincoln dealerships in Canada and the USA. Nissan and Volkswagen dealerships are expected to be added to the list of potential customers in 2016.
  3. Attracting a wider investor audience. The Company’s stock is starting to attract attention from small cap institutional investors. Recently a US-based special situations fund announced that it has accumulated over 10% of Quorum’s stock, which has driven the Company’s market capitalization to higher levels. A higher market capitalization will attract a wider investor audience to this stock, thus increasing the stock’s trading multiple.

We acknowledge that Quorum Information Technologies shares have reached our stock price accumulation target of $0.40. That said it has always been our view that the share price would likely eclipse our target price, as the Company continues to execute on its growth strategy.

Therefore, how much higher could this stock go? From $0.40 our guess is another 100% (or more).

The Company has approximately 41.6 million shares outstanding.

Quorum Information Technologies website: www.quorumdms.com.

Author Ownership Disclosure: TSXV: QIS - Yes


Read Disclaimer:

This article is for informational purposes only. This article is based on the author's independent analysis and judgment and does not guarantee the information's accuracy or completeness. The information contained in this article is subject to change without notice, and the author assumes no responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

Investorfile is not engaged in an investor relations agreement with Quorum Information Technologies Inc. nor has it received any compensation from Quorum Information Technologies Inc. for the preparation or distribution of this article.

The author of this article has acquired and may trade shares of Quorum Information Technologies Inc. through open market transactions and for investment purposes only.

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Comments:
Posted by: Laurencelefou
If the last quarters are an indication of things to come, than Quorum remains a strong buy. Revenue for the Q2 FY2015 was up 23% over the same period last year. Recurring revenue was up 13 %. The operating cash flow was $485,050. If we assume Quorum can maintain current level of sales, recurring revenues and expenses, than it is a fair beat that Quorum will generate ± $2,000,000 in operating cash flow in the next twelve months.

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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.