Intelligent Systems Corporation

INS Details

Intelligent Systems Corporation (NYSE: INS) offers credit technology solutions and processing services to the FinTech industry via its licensing and financial transaction management software. CoreCard Software, Inc., a wholly-owned subsidiary, manages the company's operations in Romania, India, and the United Arab Emirates.

Q3FY21 Results:

• Improvement in Revenues: INS' revenues increased by 25.53% to USD 12.94 million in Q3FY21 (ended September 30, 2021) compared to USD 10.30 million in Q3FY20, attributable to growth in both segments.
• Decline in Net Income: Its Q3FY21 net income declined to USD 2.53 million from USD 2.80 million in Q3FY20.
• Decent Balance Sheet: As of September 30, 2021, the company had cash & cash equivalents of USD 20.57 million and no outstanding debt.

Key Risks:

• Customer Concentration Risk: In 9MFY21, the company's primary customer, Goldman Sachs Group, Inc., accounted for 71% of consolidated sales. Excessive reliance on a single customer for revenue could be detrimental to the company's long-term financial health.

Outlook:

• Revenue Guidance: INS expects to achieve top-line growth of 30-35% for FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

INS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

INS' stock price increased 23.05% in the past six months and is currently trading close to the mid-point of its 52-week range of USD 30.52 to USD 54.58. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 45.98. We have valued the stock using the EV/Sales multiple-based relative valuation methodology and arrived at a target price of USD 39.17.

Considering the uptick in the stock price and current valuation, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 41.00, down 0.89% as of December 13, 2021, 9:40 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.