Blucora Inc’s Major Push into Fintech Could Power BCOR Stock Much Higher

Blucora stockBlucora Inc Bringing Technology to Financial Services

We all know about the rise of financial technology (fintech). The application of technology to financial services will continue to be driven by major tailwinds.

At the forefront of the fintech move is Blucora Inc (NASDAQ:BCOR), an intriguing company that uses technology to deliver better solutions in its tax software and wealth management segments.

Blucora has aggressively grown its scale via a series of strategic acquisitions in its multi-billion-dollar wealth management unit.

My view is that BCOR stock offers investors an alternative to boring bank stocks.

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A look at the below chart shows Blucora stock rallying 66% over the last three months.

That’s a strong move, but there’s likely more to come, since BCOR stock remains well below its pre-COVID-19 52-week high of $24.50 in February 2020 and its other high of $41.35 in September 2018.

The following Blucora stock chart shows the recent emergence of a bullish golden cross pattern, with the stock looking to break out from a downward trendline.

Chart courtesy of StockCharts.com

At BCOR stock’s current price level, I see a compelling contrarian situation for investors with a longer-term holding period.

Strong Fundamentals Support Bull Case for BCOR Stock

Blucora Inc’s revenues ramped higher in each of the last four years, driven by the company’s acquisitions, including a major one in 2016.

Blucora’s aggressive acquisitions helped boost the company’s revenues in 2016, followed by a record $717.9 million in 2019. The compound annual growth rate (CAGR) from 2015 to 2019 was 58%.

Fiscal Year Revenues (Millions) Growth
2015 $117.7 N/A
2016 $455.9 287.3%
2017 $509.6 11.8%
2018 $560.5 10.0%
2019 $717.9 28.1%

(Source: “Blucora Inc.” MarketWatch, last accessed February 3, 2021.)

But given the revenue boost from its acquisitions, Blucora will now need to focus on its organic growth. The next few years will give us an idea how this will play out, but the impact from the COVID-19 pandemic is uncertain.

For 2020, Blucora Inc is expected to report minor revenue growth of 3.3% to $741.5 million, followed by 8.7% growth to $805.8 million in 2021. (Source: “Blucora, Inc. (BCOR),” Yahoo! Finance, last accessed February 3, 2021.)

The good news is that Blucora has been reporting positive earnings before interest, taxes, depreciation, and amortization (EBITDA), with at least double-digit growth in each of the past four years. The company’s EBITDA was a record $125.3 million in 2019.

Fiscal Year EBITDA (Millions) Growth
2015 $28.8 N/A
2016 $80.2 178.4%
2017 $89.3 11.4%
2018 $106.6 19.4%
2019 $125.3 17.6%

(Source: MarketWatch, op. cit.)

Moreover, Blucora Inc has delivered profits on both a generally accepted accounting principles (GAAP) and adjusted earnings-per-share (EPS) basis.

Fiscal Year GAAP Diluted EPS Growth
2015 -$0.98 N/A
2016 $0.21 121.3%
2017 $0.57 175.0%
2018 $0.90 57.9%
2019 $0.98 8.0%

(Source: MarketWatch, op. cit.)

Adjusting for one-time items, analysts estimate that Blucora will see its profits fall from $2.11 per diluted share in 2019 to $0.95 per diluted share in 2020. An encouraging sign is that the company is expected to increase its adjusted profits to $1.66 per diluted share in 2021. (Source: Yahoo! Finance, op. cit.)

Blucora delivered positive free cash flow (FCF) in the last five consecutive years, including growth from 2016 to 2018. The positive FCF could be used to reduce the debt built up from the company’s acquisitions.

Fiscal Year FCF (Millions) Growth
2015 $14.8 N/A
2016 $66.2 346.4%
2017 $67.8 2.4%
2018 $97.9 44.4%
2019 $89.6 -8.5%

(Source: MarketWatch, op. cit.)

Blucora’s balance sheet carries higher debt due to its acquisitions, but there should be no issues, given the company’s profitability and FCF.

Analyst Take

Blucora Inc has strong institutional ownership; about 235 institutions own 98% of the company’s outstanding shares. Blucora stock has also been attracting strong insider buying. Over the last six months, insiders bought a net 268,778 shares. (Source: Yahoo! Finance, op. cit.)

BCOR stock looks attractive, trading at 10.7 times its consensus 2021 EPS estimate and 1.05 times its 2021 sales estimate. Furthermore, it has a price/earnings to growth (PEG) ratio of 0.86.