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Jun
5
Quorum Information Technologies is equipped to grow fast
Posted by: Gerry Wimmer
6/5/2016
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TOP IDEAS: Revenue growth momentum is building for Quorum Information Technologies (TSXV: QIS), and the stock is up 155%.




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.


Quorum Information Technologies Inc. (TSXV: QIS - $0.51) has now reported 10 consecutive quarters of revenue growth over the prior year’s quarters. In Q1 of 2016, quarterly sales jumped 21% to $2.95 million, a growth rate that is poised to continue.

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 revenues. Today, hundreds of General Motors, Toyota, Chrysler, Ford, Subaru, Hyundai, KIA, NAPA and Bumper to Bumper dealerships throughout Canada and the USA utilize the Company’s XSELLERATOR™ software products.

Quorum has been accelerating the pace of its DMS software sales and installations. According to management, to date, already 17 new auto dealerships have installed the XSELLERATOR™ software in 2016, for a total of 325 customers (rooftop locations). The Company expects to continue to add new rooftops at a rate of three to four per month in 2016. Each rooftop generates up to $36,000 of recurring subscription revenues for Quorum annually, plus additional ongoing revenue streams for training services.

The Investorfile blog first profiled Quorum Information Technologies in June of 2014 (at $0.20) as one of its Top Ideas – Small Cap Value Stocks (See: Quorum Information Technologies delivers value for auto dealerships and small cap investors). Other than Quorum’s stock price, which is up 155% since our first blog post, the biggest change for the Company is its revenue growth rate.

Will this revenue growth momentum continue? Here are four reasons why we think it will:

  1. Quorum’s strategy to focus on product innovations, improving product utilization and superior levels of customer service has increased the market demand for its DMS software products and services while displacing competitor products.

  2. The Company is growing the available market for its products by accelerating integration work with vehicle manufacturers OEMs. Last year the Company's software products were approved for use by Toyota dealerships in Canada, and Ford/Lincoln dealerships in Canada and the USA. Volkswagen is expected to be added in 2016. The Company has said it has capacity to add one auto OEM per year with plans to triple that capacity by 2017. Further OEM integration enhances Quorum's ability to market and sell to more dealerships and to larger dealer groups.

  3. Quorum has significantly grown its marketing, sales and implementation capacity with over 30 new hires over the last 12 months, reaching about 110 employees to date.

  4. The CEO of the Tricor Automotive Group Inc., which is Canada's largest automotive dealer-owned financial services company -- with over 170 dealerships that represent all OEM's across Canada -- has joined the Company’s board of directors and has made an investment in Quorum. The Tricor dealerships represent a large market opportunity for Quorum.

In our previous blog post (See: Quorum Information Technologies stock price could double again) we acknowledge that Quorum’s share price could continue its upward momentum as the Company executes on its growth strategy. We admit at today’s price, Quorum’s stock valuation is more expensive based on our "value” metrics. But, using "growth” valuation metrics and public company comparables (with other recurring revenue software companies), a strong argument could be made that the current stock price is inexpensive and therefore still a buy.

Quorum is profitable and maintains a very strong balance sheet with plenty of cash. The Company has approximately 51.2 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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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.