TOP IDEAS: The epic growth in revenues and profits at Caldwell Partners International (TSX: CWL) has the stock up over 100% in value and the share price can still support another 100% of upside.

At Investorfile we thought that Caldwell Partners’ acquisition of IQTalent Partners to begin 2021 was a transformational shift for the Company. (See: Caldwell Partners is scaling up as a technology-powered talent acquisition firm). But we never quite envisioned how dramatic and early on the revenue and profit growth could be.

Last week, Caldwell Partners International Inc. (TSX: CWL - C$1.98) released Q3 results for fiscal 2021 which was a first look at three months of financials that included the Company’s recent acquisition of IQTalent Partners. This financial report was eye-popping. In Q3, Caldwell Partners' revenues ballooned to C$35.8 million, up 210% from the prior year. Operating profit was up 332% to C$3.2 million, and the Company earned about C$0.09 in earnings per share in the quarter. Based on these results, Caldwell Partners International is operating at a 12-month revenue run rate over C$140 million.

Investorfile reviewed the Company’s Q3 Management Discussion & Analysis (MD&A) filing for the segmented financials to look at the contribution IQTalent Partners' business operations had on this quarter. We note that IQTalent Partners reported about C$9 million in revenues, with operating profit margins (adjusted for acquisition costs) near 10%. Last published in the pre-pandemic year 2019, IQTalent Partners recorded revenues of about C$20 million annually. Based on its current quarterly revenue run-rate, it has almost doubled in size already and is continuing on this rapid growth trajectory. This is evidenced by IQTalent Partners' average daily billing, which was reported increasing from $113,000 per business day in the second quarter to $136,000 in the third quarter alone and is a key metric for revenue growth.

We would be remiss not to mention that Caldwell Partners' traditional executive search business is also experiencing tremendous growth activity. In fiscal Q3, executive search revenues for the Company hit historic highs with a year-over-year increase 134%, all of which came through organic growth. This growth was supported by a combination of new partner hires and higher executive search assignments per partner.

It is important to note that Investorfile does not consider the results in Q3 for both Caldwell and IQTalent to be a post-pandemic "catch up” quarter. Management has indicated that the outlook for both businesses continues to remain strong.

To date, it is evident that the combination of Caldwell Partners and IQTalent Partners has yielded many positives as a major talent acquisition organization. IQ Talent Partners' unique service model, which includes proprietary platform-powered by Artificial Intelligence (AI)-driven sourcing technologies to provide automation and efficiency to the passive talent search process with hourly on-demand pricing, has been paired with Caldwell Partners' management expertise network and resources and retained assignment-based active talent search revenue model. Together, they cover the talent acquisition service spectrum at all hiring levels for major companies, including mid-senior management to C-suite and board levels.

We take pride in that, among all of Investorfile’s Top Ideas, Caldwell Partners International was a Top Pick of ours for 2021. (See: Investorfile Top Picks for 2021 includes a perennial winner). Since that blog post, the stock is up about 115%.

But, despite the impressive gain in the stock price to date in 2021, with a current market capitalization of about C$48 million, Caldwell Partner International’s shares are still insanely undervalued based on an Enterprise Value (EV)/EBITDA, Price to Sales (P/S) and Price to Earnings (P/E) financial metrics. In this post we will not provide the details of these ratios; It is, in our opinion, based on fiscal Q3 results and Management’s outlook, that the stock valuation could support another 100% of upside.

We do want the highlight the Company’s balance sheet. Today, Caldwell Partner International has more cash on hand than prior to its acquisition of IQTalent Partners because cash generation has been strong. As of May 31, 2021, the Company had C$12 million in free cash and was debt-free. Caldwell Partners has financial capacity to fund its growth. Company Management has suggested it is interested in making additional acquisitions to broaden its service offering to its existing customer base.

The Company’s senior executive team is beginning to increase its investor relations efforts and recently conducted video investor presentation. To view: Caldwell Investor Presentation.

To increase the outreach to US investors, Caldwell Partners upgraded the listing of their shares in United States to the OTCQX trading under the symbol "CWLPF”, where it trades in USD.

Caldwell Partners International has approximately 25.5 million shares outstanding.

The Company’s website: www.caldwellpartners.com.

Author ownership disclosure: TSX: CWL – YES

Investorfile's share price accumulation target of $1.30 for Caldwell Partners International Inc. was initially reached on July 18, 2014.

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