PI analyst Pardeep Sangha raises target on Avigilon to $18

PI analyst Pardeep Sangha says he recognizes that he is placing a higher valuation on Avigilon than its peer group, but that the company has earned it because it has higher growth than its peers.

After the market close yesterday, Avigilon (TSX:AVO) reported its Q4 and fiscal 2012 results. The company’s Q4 revenue increased 73% to $32.6-million, from the $18.9-million topline of last year’s Q4. It’s fourth quarter EBITDA was also up sharply, to $5.3-million from last year’s $2.4-million.

For the year, Avigilon’s revenue grew by 67% to $100.3M with $12.7-million in EBITDA, compared to revenue of $60.0M with $6.6M EBITDA in FY11.

PI analyst Pardeep Sangha says Avigilon’s growth is being driven by an industry shift away from analog and towards high definition digital cameras. Sangha says Avigilon is particularly well positioned to take advantage of this trend because its products generate high quality video at a low cost. He says Q4 sales exceeded his expectations, and he thinks strong double digit growth will continue. Sangha is forecasting 50% growth for Avigilon in fiscal 2013 and 40% growth in fiscal 2014. In a research update to clients this morning, Sangha maintained his BUY recommendation on Avigilon, and raised his target price to $18, up $2 from his previous target of $16.

Sangha says he recognizes that he is placing a higher valuation on Avigilon than its peer group, but that the company has earned it because it has higher growth than its peers. His target price, he says, represents a 3.0x EV/Sales and a 14.6x EV/EBITDA multiple of his fiscal 20114 estimates. The PI analyst believes growth will be driven by an expansion of the company’s sales networks, the launch of new products, and expansion into new geographical territories.