We don't think the market is giving us the right fundamental value: Dye & Durham COO
Dye & Durham Ltd.’s share price is the latest victim of the slowdown in Canada’s struggling property market, as the real estate software maker’s stock sustained its biggest one-day plunge ever on Thursday.
The Toronto-based company fell 19 per cent, the most on record, after posting a larger-than-expected net loss for its fiscal fourth quarter. The stock slipped below the $1 billion (US$740 million) market capitalization threshold, making it one of the smallest companies by value in Canada’s benchmark S&P/TSX Composite Index.
“Obviously we’re disappointed by what we’ve seen in the market today,” Dye & Durham chief operating officer Martha Vallance said in a BNN Bloomberg interview Thursday afternoon, adding the company was pleased with its results, including its “momentum” in building recurring revenues.
She ascribed recent share moves to volatility in technology stocks. “You’ve seen a lot of volatility in the market and you’ve seen a lot of other technology companies report, with a lot of reactions that are really hard to justify, and so I do think that the market is not giving us the right fundamental value.”
Real estate transactions account for more than half of Dye & Durham’s revenues, and Chief Executive Officer Matthew Proud said on an earnings call Wednesday the company’s goal is to diversify its “exposure to real estate transactions to less than 33 per cent.” Globally, that figure stood at 58 per cent in the most recent quarter, down from 68 per cent in the same period a year earlier.
Home sales in Canada dropped in July after the Bank of Canada resumed raising interest rates. Yet analysts believe the company’s shares and earnings have the potential to recover as real estate transactions pick up.
“We believe the stock is undervalued given DND’s current EBITDA profile during a challenging point in the cycle, and the strong operating leverage we’d anticipate as property transaction volumes start to recover,” BMO Capital Markets analyst Thanos Moschopoulos wrote in a note Thursday.
He said Dye & Durham’s Ebitda in the current quarter “might be a touch light.”