Analyst: Cogint "Q1 Better than Expected" $COGT

Chardan analyst James McIlree had the following to say about Cogint's (COGT) quarterly results released yesterday:

"Cogint reported better than expected Q1 results with revenue of $50.8 million equal to our estimate, but EBITDA of $5.6 million well in excess of our $2.8 million estimate. We maintain our Buy recommendation and $12.50 price target. The shares are up almost 60% since early this year but even so are still quite attractively priced at 1.3x sales and 11x EBITDA.

Both segments grew, with Information Services up 49% and Performance Marketing up 21%. Within Information Services, Healthcare revenue grew 85% to $2.7 million, Financial Services grew 40% to $2.6 million, and Media & Entertainment rose 98% to $1.8 million. Significant growth in the Performance Marketing segment included Mobile App growth of 517% to $7.5 million, Career & Education growth of 74% to $2.5 million, Market Research growth of 319% to $1.4 million.

For the remainder of the year contractual obligations include $3.2 million of data license agreements, $7.6 million of debt payments, $2 million in employment agreements and contingent stock payments to Q Interactive of $10 million. We have operating cash flow covering the cash needs, however, additional cash would be useful for more acquisitions and organic growth. At the end of Q1 the company had $22 million in cash.

We continue to expect improved gross margins and EBITDA margins for the year as the Performance Marketing business maintains current margins and the Information Services business gross margin increases with volume. At scale, gross margins for the Information Services business can exceed 70%. We expect margins to improve with the scaling of the Information Services business, and the margin improvement to drive a multiple expansion.

The shares are very attractive at current levels, trading at 1.3x sales and 11x EBITDA, both far below the comp group of 4.6x and 14x respectively. Our $12.50 price target is about 3x our FTM sales estimate. This multiple is a 33% discount to the peer group. Cogint’s EBITDA margin is below the peer group, but this is due to the substantial investment in Information Services occurring through this year. We expect EBITDA margins to increase rapidly as Information Services scales and the EV/Sales multiple could narrow versus the group. Risks to achieving our price target include a slower than expected EBITDA margin improvement in Information Services, greater competition in digital advertising, and reduced economic activity which could negatively impact growth in both the advertising and data fusion markets".

More COGT analysis HERE.

Disclosure: Long COGT

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