Analysts at Stifel GMP have reiterated their ‘Buy’ rating and price target of $50 on Docebo Inc after the learning management system provider announced a share buyback in the form of a new normal course issuer bid (NCIB).
Under the NCIB, Docebo can purchase up to 5% of its common shares, equal to 1.65 million shares, over the next 12 months.
Stifel’s analysts noted that the announcement was timely following the pullback in Docebo shares, a 17% intraday decline, on the release of its first quarter results last week. Docebo shares are currently trading at $32.27.
“While we don’t expect DCBO to fully tap this NCIB, as we see better returns deploying capital towards organic and inorganic growth initiatives,” they wrote.
“At the current share price, we feel the option for buybacks was a prudent way for the company to reinforce their view of shares being undervalued. A view we agree with. We flag new private equity interest, as per an SEC ownership filing naming Warburg Pincus as a 6.8% DCBO shareholder, as further evidence of that.”
The analysts noted that Docebo currently trades at 4x F24E versus HR tech and Rule-of-40 SaaS peers trading at 6x and 8x, respectively.
“Our target price of $50 per share was based on 6.6x F24E Sales, near the low-end of the peer group with comparable high growth and profitability profiles, to reflect near-term growth headwinds and the company's smaller market cap/lower liquidity,” they wrote.
“We believe continued execution on strong growth and improving profitability can support a re-rate in valuation closer to the upper-end of the range.”
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