REAL: Future Gains Will Be Driven By New Tier-One Lender Wins

Key Takeaways

• Accelerating client wins, scalable operations, and tech-driven market shifts are powering top-line growth and positioning for outperformance as mortgage volumes rebound.
  
• Strong cash reserves and no debt support diversification into data-driven services, enhancing long-term stability and industry leadership.
  
• Heavy reliance on a few U.S. mortgage clients and exposure to cyclical, competitive, and digital disruption risks could undermine revenue stability and growth prospects.

Catalysts

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

• Real Matters' expanding client wins-such as the onboarding of a second Tier 1 lender in U.S. Title and top 15 and top 50 lenders in Appraisal post-quarter-signal ongoing gains in customer penetration and wallet share, positioning the company to drive above-market revenue growth as origination volumes recover in a digitalizing mortgage market.
  
• The sales force investments initiated in 2024 are translating into accelerated market share gains and a robust new client pipeline across key segments; this momentum supports expectations of continued sequential top-line growth and improved operating leverage as the industry shifts further to technology-driven solutions.
  
• Real Matters is structurally positioned to benefit from pent-up demand in U.S. mortgage refinancing (with 8 million mortgages above 6.5% rates) and record homeowner equity, both of which are likely to unlock outsized transaction volumes and fee income once prevailing rates decline, magnifying revenue and EBITDA as market activity cycles up.
  
• Management highlights substantial remaining platform capacity (2x current volume in title, 30% in appraisal) without significant incremental operating costs, which provides immediate scalability and potential net margin expansion when volume rebounds, as higher throughput dilutes fixed costs.
  
• The company's strong cash balance and zero debt enable continued investment in data-driven or less-cyclical adjacent service lines (e.g., analytics, digitized title/closing), supporting diversification and long-term earnings stability while leveraging accelerating industry adoption of digital and big data solutions.

Real Matters Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Real Matters's revenue will grow by 19.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from -2.9% today to 8.3% in 3 years time.
• Analysts expect earnings to reach $24.1 million (and earnings per share of $0.32) by about September 2028, up from $-5.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.7x on those 2028 earnings, up from -67.8x today. This future PE is greater than the current PE for the CA Real Estate industry at 9.7x.
• Analysts expect the number of shares outstanding to grow by 0.33% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.34%, as per the Simply Wall St company report.

Real Matters Future Earnings Per Share Growth

Risks

• Persistent cyclical volatility in mortgage origination: Real Matters' core segments (U.S. Appraisal and U.S. Title) remain highly exposed to macroeconomic cycles-recent results highlight flat or declining addressable market volumes and softer-than-expected spring activity, suggesting prolonged downturns could depress revenue, net revenue margins, and adjusted EBITDA.
  
• Revenue concentration and client dependency risk: Growth is driven by a small number of major lenders (Tier 1s, largest credit union, and top 50s); the temporary loss or shifting allocation of market share by a significant client, as seen with year-over-year revenue declines when allocations normalized, could materially reduce future revenues and earnings.
  
• Intense competitive and pricing pressure: Incidents like temporary competitor shutdowns underscore a fragmented, fiercely-contested market; ongoing competition from both traditional and emerging digital/fintech providers may erode pricing power and compress net margins over the long term.
  
• Limited diversification and sensitivity to U.S. market: Earnings remain concentrated in U.S. mortgage and real estate cycles, with minimal international expansion; any prolonged downturn or regulatory/policy change in the U.S. market could sharply impact consolidated revenues and margin stability.
  
• Threat from industry digitalization and disintermediation: While Real Matters invests in proprietary platforms, broader secular trends toward full automation and AI-driven valuation/title tools may bypass or commoditize its services, posing a risk to sustaining current market share, long-term revenue, and profitability growth.

Valuation

• The analysts have a consensus price target of CA$7.178 for Real Matters based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$10.45, and the most bearish reporting a price target of just CA$5.72.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $289.7 million, earnings will come to $24.1 million, and it would be trading on a PE ratio of 19.7x, assuming you use a discount rate of 7.3%.
• Given the current share price of CA$6.25, the analyst price target of CA$7.18 is 12.9% 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.