GTY Technology Holdings Inc: This Decimated Tech Play Could Benef…

Why GTYH Stock Could Rise

Government spending accounted for 44% of U.S. gross domestic product (GDP) in 2020, compared to 35% to 40% in the previous years going back to 2012. (Source: “United States Government Spending to GDP,” Trading Economics, last accessed January 31, 2022.)

The spending has driven the national debt toward $30.0 trillion. This isn’t sustainable. There needs to be more accountability, including streamlining costs and increasing efficiency.

That’s easier said than done, but GTY Technology Holdings Inc (NASDAQ:GTYH) could help all levels of government cut wasteful spending. The company brands itself as a technology solutions provider that streamlines public sector systems.

GTY Technology Holdings Inc was founded by former executives at consulting company Accenture Plc (NYSE:ACN) and data solutions company EMC Corporation.

GTY Technology stock is down by 41% from its 52-week high of $8.28. There’s a clear lack of investor confidence in the company (as shown in the below chart). GTYH stock recently moved into a death cross pattern below its 50-day and 200-day moving averages.

At this point, GTY Technology stock is looking for oversold support. The previous time GTYH stock tested this level was in May 2021. That was followed by a strong rally.

Chart courtesy of StockCharts.com

Revenue Growth Is Expected to Power GTY Technology Stock

GTY Technology Holdings Inc’s three-year reported financial history shows its revenues increasing by 61% from 2018 to a record $48.1 million in 2020. The direction of the growth is positive, with the 12-month rolling revenues at $56.9 million.

(Source: “GTY Technology Holdings Inc.” MarketWatch, last accessed January 31, 2022.)

Analysts estimate that GTY Technology will ramp up its revenues by 26.2% to $60.8 million in 2021 and by 19.2% to $72.4 million in 2022. (Source: “GTY Technology Holdings Inc. (GTYH),” Yahoo! Finance, last accessed January 31, 2022.)

The company’s multiple of 3.8 times its 2022 consensus revenue estimate is reasonable in this high-valuation economic environment.

But GTY Technology Holdings Inc will need to focus on controlling its own expenses. So far, the company has reported negative earnings before interest, taxes, depreciation, and amortization (EBITDA).

(Source: MarketWatch, op. cit.)

Achieving generally accepted accounting principles (GAAP) diluted earnings per share (EPS) or adjusted profitability is likely years away for GTY Technology Holdings Inc.

(Source: MarketWatch, op. cit.)

GTY Technology Holdings Inc’s free cash flow (FCF) has been negative, which isn’t surprising, considering the company’s losses and negative EBITDA. A plus is that the company’s FCF improved by 76% in 2020, but achieving positive FCF is likely years away.

(Source: MarketWatch, op. cit.)

Analyst Take

GTY Technology Holdings Inc’s institutional ownership is decent for a company of its size. About 96 institutions hold a 45.8% stake in GTYH stock. (Source: Yahoo! Finance, op. cit.)

GTY Technology stock should be viewed as a work in progress. The company’s revenue growth provides some optimism, but ultimately management needs to offer a path toward positive EBITDA.