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