Ibex Momentum Continues With More Than 20% Rally This Week On Stellar Q1 Results And Potential Private Equity Takeover

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Discusses Q1 results and recent developments in the stock with analysis

Shares of small cap outsourcing firm Ibex Ltd (NASDAQ:IBEX) experienced continued momentum over the last week, rising more than 23% as positive new flow continued for the stock. In total, shares are up around 75% over 2022, outperforming major US indexes.

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This week, on Tuesday afternoon the company released its third quarter update telling investors that it had grown revenues by 17.8% over the year to $127.88 million from $108.57 million in the prior year. The figure came in 2% ahead of analyst forecasts expecting around $125.5 million.

Ibex's Earnings

Total profit grew 27.1% over the year to $7.27 million after costs from $5.72 million in 2021. On an underlying basis, the firm grew adjusted EBITDA by 59.1% to $18.2 million and beat consensus forecasts expecting around $17 million.

At the bottom line, the Ibex grew net profits after taxes by 42.9% over the year to $4.31 million, translating to earnings per share (EPS) of 23 cents. On an underlying view of net earnings, the company generated adjusted EPS of 34 cents per share. The street had expected around 27 cents per share.

For the full FY23 year, management reaffirmed sales guidance of $545-555 million and adjusted EBITDA forecasts of $77-79 million. Capex spending is expected to remain within the $18-22 million budget.

IBEX’s CEO Bob Dechant credited the firm's growth to the group's new “powerful new logo engine and ability to land and expand partnerships” which continued to drive vertical growth and diversification.

Dechant also noted to investors that the diversification of clients built over the years is helping with the resilience of earnings as there is less concentration risk to any specific client or vertical.

Analyst Daniel Perlin from RBC Capital markets increased his target price from $6 to $26 following the strong result. Perlin believes there will be continued upside for the stock as Ibex experiences a continued positive mix shift towards faster-growing clients and workloads to higher-margin geographies. RBC remains ‘outperform’ rated on the stock.

On average, IBEX has a consensus ‘overweight’ rating and an average $25 target price. Three of four analysts have ‘buy’ calls on the stock.

Before the release of first quarter earnings, last week Bloomberg reported in an article that the Ibex had attracted takeover interest from private equity. The report discussed interest from parties including buyout firm CVC Capital Partners. While no deal is certain, it does provide a positive backdrop to the IBEX stock story. The news of potential M&A interest initially sent IBEX shares up more than 10% in the week leading into the result.

Fintels institutional ownership accumulation score of 75.22 is bullish on IBEX, based on higher levels of institutional buying activity in the stock relative to other companies. SRNE ranks in the top 10% when screened against 34,471 other companies.

IBEX has a total of 136 institutions on the register that collectively own 6.3 million shares of the float. Some of the largest institutions include: American Century Companies Inc, Ameriprise Financial Inc, Wellington Management Group Llp, Schonfeld Strategic Advisors LLC, American International Group, Inc, and Royce & Associates Lp.

Article by Ben Ward, Fintel