 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:
- 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.
- 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.
- 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. |
