Stock Pick: PNI Digital Media (PN) makes money printing photos for the digital age

Mobile photo-printing apps offer areas for growth

Chart showing trailing 12-month stock performance of PNI Digital Media

When you print a picture at Costco or Walmart all you’re really thinking about is whether or not your masterful shot will come out blurry. You probably haven’t thought about who’s responsible for getting the photo from your computer to the big box store’s photo department. Well, you should.

That technology was created by Vancouver’s PNI Digital Media (TSX: PN), a $43 million market-cap company, which saw some impressive growth in its first quarter of the year. Its $8.2 million in revenue was up 24% year-over-year and 51% quarter-over-quarter, while its $2 million EBITDA beat consensus estimates by $600,000.

The company may be small, but Justin Kew, an analyst at Cantor Fitzgerald, expects a lot more growth ahead. He points out that this was the first quarter in more than four years where revenue per transaction grew. “This is an important metric as it finally signals that each incremental transaction is generating revenue,” he wrote in a February 12 report.

The company, which has Costco and Walmart as clients, is expected to close deals with Office Depot and Samsung soon, and Kew expects to see growth in mobile-related photo printing. He predicts full year revenues to grow by 63% between 2013 and 2016.

Because it’s so small, it is more of a speculative play, so be careful. But as long as people keep printing pictures off their phones and computers, then this company will benefit. It’s currently trading at $1.08, but Kew thinks it will hit $1.85 over the next 12 months. Others predict it to reach between $2 and $2.25 by this time next year.