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Aug
3
Right now is a good time to buy stock in Quorum Information Technologies
Posted by: Gerry Wimmer
8/3/2020
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TOP IDEAS: Quorum Information Technologies (TSXV: QIS) is a SaaS company that growth investors should want to own at these share prices.





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.


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 year?

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 processes.

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.

It is 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.

Coupled 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 investors).

We note that that last week, Cormark Securities had raised their 12-month target price for the stock to C$1.50 per share.

Quorum Information Technologies has approximately 72.3 million shares outstanding.

Company 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.