The share price of car parts software company Infomedia Limited (ASX: IFM) has rocketed higher by over 6% today following the release of a research note from Bell Potter that rates it a buy with a 75 cents price target.
This will be a welcome relief to shareholders who have endured a difficult 12 months. During this time the share price has dropped a massive 45% from its 52-week high of $1.17. Whilst this price target still falls well short of that high, it is a step in the right direction.
These declines stem from a disappointing half year result. Although the company delivered half year revenue growth of 16% to $33.9 million, on the bottom line profit dropped 14% to a disappointing $6 million.
Further compounding shareholder misery was its profit downgrade announcement in May relating to restructuring costs. The announcement revealed full year profit would drop by around 30% to be in the range of $10.2 million to $10.5 million.
Management revealed that it expects these restructuring costs and investments for growth will be a benefit to the company in fiscal 2017. It would appear as though Bell Potter analysts agree with this view and see the company turning a corner next year.
With the shares changing hands at approximately 19x forecast full year earnings, I wouldn't necessarily class them as being cheap. But if the company can turn its fortunes around then there could be a rewarding long-term investment here.
I feel it might be best to wait and see what the full year results reveal before making an investment. In the mean time I would highly recommend taking a closer look at ARB Corporation Limited (ASX: ARB) and Burson Group Ltd (ASX: BAP). In my opinion both are quality shares with strong tailwinds supporting their long-term growth.
