Cosol (ASX:COS) is well undervalued given its improved operating performance in the fiscal second half, with a return to top-line growth in fiscal 2027 and beyond being the key to restoring investor confidence, Euroz Hartleys said in a Monday note.

Operating earnings before interest, taxes, depreciation, and amortization (EBITDA) increased to AU$6.3 million in fiscal second half from AU$3.5 million in the previous half, although the fiscal-year result was impacted by a goodwill impairment below EBITDA, leading to a AU$4 million net loss.

The investment firm forecasts fiscal 2027 revenue of AU$108 million and EBITDA of AU$12.5 million, assuming the company sustains its fiscal second-half EBITDA margin.

Euroz Hartleys said the company has improved sales capacity, won new contracts, and right-sized costs, while revenue was flat half on half and down year on year on the loss of a managed services contract and weaker coal demand.

It noted that the company's fiscal 2027 focus is on growing transport revenue, expanding IBM Maximo in the Americas, refocusing sales on asset-management services, and leveraging its data expertise to drive artificial intelligence and recurring revenue.

Euroz Hartleys maintained a speculative buy recommendation on Cosol while its AU$0.39 price target is under review.