On Thursday, i3 Verticals, Inc. (NASDAQ:IIIV) was added to DA Davidson's Stampede List, a selection of stocks the firm identifies as poised for significant growth. The inclusion comes with expectations from the firm that i3 Verticals may sell its Merchant Services segment for an estimated 8 times its fiscal 2024 segment adjusted EBITDA of $42 million. The potential sale is anticipated to significantly reduce or possibly eliminate the company's net leverage.
DA Davidson foresees that following the sale of the Merchant Services segment, i3 Verticals will be revalued by the market as a pure-play Vertical Software company. The firm projects that this strategic shift will lead to a substantially higher valuation for i3 Verticals. The move to add i3 Verticals to the Stampede List is based on the criteria of Portfolio Restructuring, indicating a strategic change that could enhance shareholder value.
The Stampede List is a curated group of stocks that DA Davidson believes have strong potential due to various catalysts, including corporate restructuring, which is the case for i3 Verticals. The firm's analysis suggests that the divestiture of the Merchant Services segment would be a positive step towards streamlining the company's operations and focusing on its core Vertical Software business.
The anticipated transaction and subsequent repositioning are part of i3 Verticals' broader strategy to optimize its business structure. DA Davidson's outlook implies that the sale could be a transformative event for i3 Verticals, setting the stage for future growth and profitability as a specialized software provider.
In summary, the addition of i3 Verticals to DA Davidson's Stampede List highlights the firm's confidence in the company's potential to unlock value through strategic portfolio restructuring. The anticipated sale of the Merchant Services segment is expected to markedly improve the company's financial leverage and position it for a higher market valuation as a focused Vertical Software entity.
InvestingPro Insights
The recognition of i3 Verticals, Inc. (NASDAQ:IIIV) by DA Davidson underscores the potential of the company's strategic moves. In line with this, InvestingPro insights reveal additional dimensions of the company's financial health and market position. The market capitalization stands at a solid $654.22 million, reflecting investor sentiment and the company's scale in the marketplace. Despite a negative P/E ratio of -1,116.66, the adjusted P/E ratio for the last twelve months as of Q1 2024 shows an improvement to -139.46, pointing to a narrowing gap between the company's earnings and its share price.
Revenue growth also presents a positive picture, with a 14.02% increase in the last twelve months as of Q1 2024, suggesting that i3 Verticals is expanding its top-line effectively. This is further supported by a gross profit margin of 78.23%, indicating strong profitability at the core operational level. However, it's important to note that i3 Verticals is trading at a high earnings multiple, as highlighted by one of the InvestingPro Tips, which could signal a premium valuation compared to its earnings potential.
Another InvestingPro Tip that investors might consider is the analysts' prediction that i3 Verticals will be profitable this year, which aligns with the company's growth trajectory and DA Davidson's positive outlook. For further insights, investors can explore additional InvestingPro Tips on the company's profile at https://www.investing.com/pro/IIIV. There are 7 additional tips available, providing a deeper analysis for those considering an investment in i3 Verticals. To get a more comprehensive view and actionable insights, use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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