One of my Biggest Slip-ups ; my forecast for VIQ Solutions (VQS)

     This blog(Workathon) has made several accurate forecasts of the future for Canadian small cap stocks.But one of my biggest mistakes was VIQ Solutions (VQS) it transcribes  legal documents into digital format and captures court documents on video.I forecasted it would go up to $5 and then $8 a share.It did make it to $5 for quite awhile and even $8 for 4 months but now it has fallen off to the $2.50 area.Where did I go wrong?

    Former Blogs

   I wrote 3 blogs on Wordpress (EconothonII) - one on August14,2020; one on October17,2020 and one on April23,2021.The first 2 were fairly accurate as the stock climbed to $5 and even $8 for awhile.But VQS could not raise it's annual revenue to $35 million and adjusted EBITDA to $4-$5 million.It has a loyal or dedicated customer base but it could not increase it's customer base.All 3 of these blogs counted on VQS making a new acquisition in 2021.Finally it did make a substantial acquisition in Australia late in 2021.VQS says this will increase revenues by $14 million (40%) in 2022.And this will help cover it's fixed costs as VIQ Solutions has expensive equipment to amortize.

    Using their Capital Base

  VIQ Solutions has come a long way since 2019.But this blog and VQSmanagement  thought that VQS shares would continue to trade in the $8 price range.The stock has fallen because VQS did not reach it's forecast of revenue and adjusted EBITDA.The pandemic did not help this stock.But on the bright side VIQ Solutions now has reduced it's debt completely.And it only has 30 million shares outstanding.This is not much for a small-cap technology stock.And this is after their Australian acquisition.

      It appears that the 4 acquisitions made since 2019 have been carefully made with a minimum of good will paid out.There may be few  other acquisitions around that can be immediately accretive to income.But this blog believes that VQS may have to either make a few more risky investments or pay considerably more goodwill to increase their revenue base.After all they still have negative net income.Many companies find themselves in this position after making 2 or 3 accretive acquisitions.Otherwise a larger company with a broader revenue base may start looking closer at VQS.

     Consolidation

   VIQ Solutions now is debt free as well as having a small number of shares outstanding.VQS is likely worried about issuing more shares and diluting shareholder's earnings.So expansion of the customer base likely will be accomplished by another acquisition.A future acquisition may require some shares issued but mostly new debt.

         

                                                             

      This blog see the next quarter as pivotal.If revenues aren't at least $50-$52 million and adjusted EBITDA around $7 million then the stock price will likely drift lower.This may bring an unsolicited bid for purchase or rerquire VQS to make a less than desirable acquisition.In fact, VQS management may be talking to both kinds of partners right now.

                      DaleMcintyre is a freelance writer that works primarily with Zacks Research and MoneySense websites.     https://www.zacks.com/   https://www.moneysense.ca/