Digital Mortgage Solutions Will Capture Millennial And Gen Z Demand

Key Takeaways

• Expanding Tier 1 client base, cost discipline, and digital platform provide outsized growth and margin expansion potential versus current market expectations.
  
• Data assets and financial strength enable new high-margin revenue streams, product innovation, and acquisitions, supporting long-term diversification and earnings outperformance.
  
• Heavy dependence on cyclical U.S. mortgage markets, regulatory and tech pressures, and client concentration pose significant risks to revenue stability and long-term growth.

Catalysts

A technology and network management company, provides appraisal and title services in Canada and the United States.

• Analysts broadly agree that Real Matters' expanding Tier 1 client base positions it to capture outsized origination volumes as rates decline, but market share and client onboarding have already outpaced underlying market contraction-even modest volume normalization could deliver exponential revenue and EBITDA growth well ahead of consensus projections.
  
• Analyst consensus expects operating leverage to improve as volume returns; however, Real Matters' disciplined cost structure and year-over-year net margin increases in Title show that even cautious revenue recovery scenarios could lead to margin expansion and earnings multiples beyond historical highs, suggesting current valuation models are too pessimistic.
  
• Real Matters is uniquely positioned to capitalize on the accelerating shift toward digital, tech-enabled mortgage processing, leveraging its proprietary platform to become the default infrastructure for major lenders, which could unlock long-term recurring revenue streams and premium pricing advantages.
  
• Access to troves of proprietary transactional data and ongoing investments in data analytics set the stage for robust monetization via ancillary products, AI-driven risk assessment, and partnerships, potentially generating new high-margin revenue streams that are not yet captured in forward estimates.
  
• The company's strong cash position amid industry consolidation enables opportunistic bolt-on acquisitions or new product launches, opening up avenues for diversification and steady EPS growth while maintaining financial resilience, further supporting significantly higher multiples on future earnings.

Real Matters Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Real Matters compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Real Matters's revenue will grow by 23.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 0.9% today to 9.5% in 3 years time.
• The bullish analysts expect earnings to reach $31.0 million (and earnings per share of $0.41) by about July 2028, up from $1.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 24.1x on those 2028 earnings, down from 183.5x today. This future PE is greater than the current PE for the CA Real Estate industry at 9.4x.
• Analysts expect the number of shares outstanding to grow by 0.97% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.23%, as per the Simply Wall St company report.

Real Matters Future Earnings Per Share Growth

Risks

• Real Matters remains heavily reliant on U.S. mortgage origination and refinancing volumes, which are historically cyclical and currently pressured by rising interest rates, creating sustained revenue headwinds as shown by the recent double-digit year-over-year decline in overall net revenue.
  
• Increased regulatory scrutiny, coupled with the risk of escalating compliance costs in both the U.S. and Canada, could materially increase the company's operating expenses and erode net margins over the long term.
  
• Continued technological disruption and the growing adoption of digital mortgage solutions threaten to reduce demand for Real Matters' intermediary services, requiring ongoing investment in tech that may not be matched by sufficient market share gains, putting pressure on both net margins and long-term earnings growth.
  
• The company's client base remains concentrated among a small number of major U.S. lenders and servicing shops, increasing vulnerability to shifts in client relationships, possible loss of key contracts, and significant revenue volatility.
  
• Real Matters' lack of international diversification means its fortunes are closely tied to North American housing cycles; a prolonged downturn in homeownership rates or stricter climate-related regulation in these markets could structurally reduce transaction volumes and curb long-term revenue growth.

Valuation

• The assumed bullish price target for Real Matters is CA$10.95, which represents two standard deviations above the consensus price target of CA$7.85. This valuation is based on what can be assumed as the expectations of Real Matters's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$11.02, and the most bearish reporting a price target of just CA$6.5.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $325.3 million, earnings will come to $31.0 million, and it would be trading on a PE ratio of 24.1x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of CA$5.46, the bullish analyst price target of CA$10.95 is 50.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.