While Shuttleworth’s coverage universe normally limits itself to Canadian listed tech stocks, he says he couldn’t resist initiating coverage on a Canadian tech stalwart that IPO’d on the Nasdaq in April of 2010. Mitel (NASD:MITL) was founded in Ottawa by the legendary Terry Matthews and Michael Cowpland , who later went on to found Corel.
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Shuttleworth points out that after poor results in 2010, Mitel’s board made major changes that improved the company’s bottom line. These changes, he says, have largely been ignored by the street because the company stumbled after its public offering. Today, Mitel does over $650 million in revenue, with adjusted EBITDA of $70 million. Despite this, it now trades at a 4.2 EV/EBITDA multiple, while its comparables, such as Cisco, Avaya and ShoreTel, are trading at 6.2 times EV/EBITDA.
Shuttleworth yesterday initiated coverage on Mitel with a $7 target. The stock closed today down 5.2% to $4.19.
Shuttleworth’s other top pick is Waterloo’s Descartes Systems Group (TSX:DSG). The M Partners analyst recently raised his target on Descartes to $12 from his previous target of $10. He says he did this because, looking at Descarte’s business, he thinks they should be valued like Software as a Service businesses such as Salesforce.com (NYSE:CRM), rather than a mere logistics businesses, which have lower valuation multiples. Shuttleworth says his target on Descartes puts its valuation squarely in the middle of the field of SAS players.
To view the full interview, which includes Shuttleworth’s take on why it might be best to hold off a while on network policy management player Sandvine (TSX:SVC) click here.