Tecsys shows flat third quarter results

    On March1, Tecsys reported it's third quarter results and earnings were good but revenues were flat.Third quarter revenues were $17.2 million compared to $17.4 million for 2016.On the other hand, third quarter adjusted EBITDA was $1.3 million compared to $1.9 million in 2016 but there was a $.4 million foreign exchange loss.But for 9 months adjusted EBITDA was up 10% and e.p.s up 70% from 2016.While adjusted EBITDA for 2017 was up 40% and e.p.s was up 40% from 2016.
              A Transition for Tecsys                     

           Tecsys provides supply chain and warehouse management but it also operates three or four junior construction companies.Two of them are in western Canada.This blog believes that it has a small position in one or two junior construction companies around north Toronto.Revenues in the oil patch might  have been volatile for the last two or three years.So the supply chain management business has acted to stabilize revenues.This blog has recommended in the pst to focus on the construction business and sell off parts of the supply chain management business.
           Financially Speaking
           Tecsys is a small company with 13 million shares and a  market capitalization of about $210 million.Long term debt is down about 40% from 2017 while share capital is up about 7 to 8%.It now has 13 million shares.There has been a reduction in retained earnings of about $500,000 over 2016 and chiefly a gain in equity to the owners of $11 million.The reason debt has fallen is principally because they issued 767,000 shares and raised $11 million;some  of it has been used to repay debt. However this blog finds their capital structure restrictive and it limits their growth.
                              

Future Prospects

Tecsys has come a long way in the last 5 years.Revenues and net income and adjusted EBITDA have steadily moved up;it is a growth stock.And this growth has commanded a fairly good P/E ratio.The price/earnings ratio for 2017 will be above 30 as e.p.s will be about $.45 to $.50.This is with their present 13 million shares.And this blog has called for an increase in equity which will increase revenues and earnings but will it increase e.p.s?On the other hand it's debt has fallen considerably.Tecsys must find a way to increase it's equity along with a small increase in debt.It has small but not controlling positions in several construction companies and a substantial interest in a supply chain management business.The increase in capital must be used  to increase one or both businesses.  

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