Quorum Information Technologies (TSXV: QIS) is a SaaS company that growth
investors should want to own at these share prices.
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.
Just prior to the COVID-19 pandemic,
shares in Quorum Information Technologies Inc. (TSXV: QIS – C$0.96) traded at
an all-time high of C$1.65. Today the stock trades at price levels that are 42%
less. Is this company’s Software-as-a-Service (SaaS) for the automotive retail business worth almost half as much now since the beginning of this
We do not think so.
As a matter-of-fact, the COVID-19 pandemic
may prove to become a tailwind to this Company’s marketplace as more people may
choose to drive rather than fly or take public transit.
Like its name says, Quorum is
an information technology company but with a focus on serving the
automotive retail business. Quorum Information
Technologies describes itself as a company that offers auto dealerships
technology-enabled end-to-end business processes beyond merely integrated
software, but its systems are designed to work from a single set of
information that facilitates a seamless workflow and eliminates inefficient
For auto dealerships, Quorum offers a product suite which
includes its core XSellerator Dealership Management System ("DMS”) and other
divisions' products that are bundled into Performance Packs for dealerships’
sales and service departments. The Performance Packs combine specific
integrated SaaS products to help dealers increase customer transparency and
satisfaction and drive additional revenues into the dealership.
Today, over 1,000 dealerships across North America either have purchased the full Quorum product suite as a monthly
service offering or they subscribe individually to one or more products in
the suite. Quorum’s key products are the XSellerator DMS (including
Communicator), DealerMine Service CRM (including eService), Autovance Desk and
Advantage DMS. Additional products or services include: XSellerator Sales CRM,
DealerMine Sales CRM, Power Lane,Q
Analytics, Autovance Menu and DealerMine BDC services.
In the last 12 months,Quorum
Information Technologies has demonstrated strong historical organic growth in
revenues after completing three strategic acquisitions over the last
two-and-a-half years. Today, the Company has an annual revenue run rate has
grown to about C$35 million.
important to note that over 90% of the reported revenue by the Company is
recurring in nature from monthly Software-as-a-Service (SaaS) subscription fees
and long-term and evergreen contracts (Call Centres). This continues to provide
good visibility for Quorum’s business operations going forward.
with the good revenue visibility is the Company’s profitability, with
annual EBITDA margins well above 10%. Quorum also maintains a good balance
sheet with cash on hand.
The purpose of this specific blog
post is to convey that Investorfile is of the opinion that, as of late
(and relative to other SaaS companies), Quorum Information Technologies’ stock
price is not fairly valued by the market. With a current market cap of C$69
million, the shares trade at only two times the Company’s annual revenue run
rate. We see many other SaaS stocks trading at much higher revenue multiples. Therefore
we feel it is timely to buy this stock (if it continues to trade around C$1.00)
before the general investment community rediscovers the merits of owning shares
of Quorum Information Technologies again.
We do want knowledge the Company will be
issuing its Q2 financials during the month of August and we expect that the results
will be soft due to the full impact that COVID-19 had on its business in this
quarter. That said,such financial information is historic and we expect
operations have normalized since, which will be reflected in Quorum’s Q3
results to be issued later this year.
Despite the fact that the stock price is
down considerably from its trading highs earlier this year, Quorum Information
Technologies has been a strong performer on Investorfile’s list of Top
Ideas. The stock’s value is still up 380% since Investorfile first recommended this Company as
a small cap value investment opportunity (See: Quorum
Information Technologies delivers value for auto dealerships and small cap
We note that that last week, Cormark
Securities had raised their 12-month target price for the stock to C$1.50 per
Information Technologies has approximately 72.3
million shares outstanding.
Author Ownership Disclosure: TSXV: QIS - Yes
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.