Canaccord Genuity (TSX:CF, LSE:CF) analysts have repeated a 'Speculative Buy' rating and $2.00 price target on Think Research Corporation (TSX-V:THNK) after the firm reported a Q1 result that was ahead of their expectations.
They noted that Think's Q1 results showed revenue of $20.2 million versus their estimate of $19.7 million and an adjusted EBITDA loss of $0.3 million versus their estimate of a $0.7 million loss.
The analysts pointed out that the quarter featured a strong sequential uptick in Technology revenues, which offset another COVID-19-impacted performance for Clinical Research and Clinical Services. Positive cash flow in the quarter was a standout given better collections, they added.
READ: Think Research reports record first-quarter revenue as software and data solutions business continues to grow
The analysts said Think's Clinical Research business is expected to recover from delays in Q1 as studies were pushed to Q2/Q3, though more recovery is expected in Q3 and beyond.
The recent contract with a large global pharmaceutical business, announced on May 19, 2022, should support the higher run-rate in the technology segment, they added.
The Canaccord analysts also noted that Think maintained its outlook to exit the year on a substantially positive EBITDA run-rate, supported by ongoing cost rationalization efforts which have recently driven increased savings.
"Given the current equity market climate, we believe achieving positive EBITDA and FCF is key to reinflating Think’s valuation," they concluded, noting that their $2.00 target is based on around 1.6 times EV/Sales or 17.5 times EV/EBITDA on their estimates.
On 2023 estimates, Think currently trades at 0.8 times 2023E EV/Sales and 10.1 times EV/EBITDA while its peer group of hybrid health providers currently trades at 1.4 times 2023 estimates, the Canaccord analysts added.
Contact the author at jon.hopkins@proactiveinvestors.com