TOP IDEAS: Noble Iron Inc.’s (TSXV: NIR) Software-as-a-Service (SaaS) business for the equipment rental industry has a growing recurring revenue base and profit visibility.

We first introduced Noble Iron to our list of Top Ideas for Investorfile just four months ago. Since that blog post (See: Noble Iron is an attractively valued SaaS company with cash), the stock is trading over 100% higher in value. Based on 2020 annual and 2021 Q1 financial results released subsequent to our introductory post, we understand why the shares are worth a lot more now.

Noble Iron Inc. (TSXV: NIR - C$0.60), through its wholly owned subsidiary Texada Software (based in Guelph, Ontario), has been scaling its Software-as-Service (SaaS) business. Texada offers cloud software solutions for equipment rental companies, equipment dealerships, construction companies, contractors, and customers who own or use construction or industrial equipment.

The Company’s flagship product is a rental management software application called Systematic Rental Management (SRM), which automates the functions for an equipment rental business in the areas of inventory management, purchases orders, counter operations, work orders and maintenance schedules. Texada has also developed stand-alones or add-on options to its existing SRM, called FleetLogic, Gateway and Texada Pay, providing more software service offerings to the same customer base.

In Management Discussion and Analysis (MD&A) filings over the past several quarters, the Company had stated that its anticipates an upward trend for rental companies to increase the use of the Company’s cloud software solutions, both through conversion from on-premise customers to the cloud offerings, and through uptake of new customers. Revenues reported in recent financial results provide confirmation that this occurring.

The majority of Texada’s revenues are recurring, derived from SaaS subscription fees and monthly maintenance service. For the last three consecutive quarters, revenues have been on the rise. In the most recent quarter of Q1 2021, Noble Iron reported revenues of about C$1.6 million. Over 80% of these revenues were classified as recurring by the Company. At the Q1 revenue base, Noble Iron operated at a near breakeven level for cash flow from operations, EBITDA and net income. This provides some visibility towards future profitability as revenues continue to grow.

We recently spoke with the CEO and major shareholder of Noble Iron. The CEO confirmed to us that the business activity for Texada’s software offerings is robust and there are several larger customer contracts they anticipate to win this year. With that, the Company’s CEO said they are also evaluating merger and acquisition (M&A) opportunities. Noble Iron has over C$5 million in cash on its balance sheet and no bank debt.

Albeit on low trading volumes, Noble Iron's stock price has more than doubled in value since earlier this year. We note the shares last traded at Investorfile’s accumulation target price of C$0.60. But, given recent financial results and our discussion with the Company’s CEO, we still encourage small cap investors with a longer investment horizon to acquire shares of Noble Iron near its current trading levels to maximize upside potential.

At a C$0.60 share price, Noble Irons’ stock is valued at only about three times its current Annual Recurring Revenues (ARR) run-rate. That said, the Company’s ARR continues to trend higher. If you factor in new customers wins and the potential for M&A activity, the shares are still not expensive for a SaaS stock.

While Investorfile acknowledges Noble Iron is a very under-promoted small public company, its financial results should not go unnoticed.

Noble Iron Inc. has approximately 27.3 million shares outstanding.

Company website: www.nobleiron.com

Author Ownership Disclosure: TSXV: NIR – Yes

Investorfile's share price accumulation target of C$0.60 for Noble Iron Inc. was initially reached at the market close on February 8, 2021.

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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.

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The author of this article has acquired and may trade shares of Noble Iron Inc. through open market transactions and for investment purposes only.