Avigilon can continue torrid growth, says Clarus analyst Peasgood

Clarus Securities analyst Sean Peasgood says that while Avigilon’s growth has slowed this year, he believes the company can continue to grow faster than the market. On November 7th, after market close, Avigilon (TSX:AVO) will report its Q3, 2012 results.

The quarter will follow a Q2 in which the company earned $1.31-million on revenue of $24.4-million, which was a 52% increase over the $16-million topline the company posted in the same period a year prior.

Clarus Securities analyst Sean Peasgood says that while Avigilon’s growth has slowed this year, he believes the company can continue to grow faster than the market.

Avigilon, he notes, grew its revenue by 91% in 2010 and 86% in 2011. The analyst expects that growth will slow to a still torrid 60% in fiscal 2012.

The Clarus analyst says that Avigilon’s is clearly the leading solution on the market, yet still has less than .05% market share. He also believes the company will achieve further penetration into major integrators like ADT and Tyco; and can expand into new geographic markets. In a research update to client today, Peasgood reiterated his BUY recommendation and $9 price target on Avigilon.

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Founded in 2004, Avigilon designs and sells next-generation surveillance systems. Management says the surveillance market is fragmented because to date there has been no integrated supplier of equipment, meaning the majority of end users do not have high definition systems due to compatibility issues and a lack of industry standards. Avigilon allows clients operating mission critical environments such as prisons and casinos to have install a high def system that is reliable as analog, and has the added benefit of providing video resolution that is standing up in courtrooms, which reduces legal costs. Avigilon has sold over 210,000 camera and software licenses that have been installed at more than 12,000 customer sites.

Peasgood says he is waiting on the visibility the quarter will bring to reassess his price target, which he believes may be on the conservative side. He says his target can increase to $12 per share if the company begins to gain traction with a major integrator or expands into a new geographical market quicker than expected. He says if management is able to reach its stated goal of $500 million (or 2% market share) by 2016, his discounted cash flow target would increase to $16.20 per share.

Shares of Avigilon closed today up 1.5% to $8.75.

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