PI raises target on Avigilon to $21

With recent increases in revenue and margins, Vancouver-based security company Avigilon (Avigilon Stock Quote, Chart, News: TSX:AVO) has proven it deserves a premium valuation, says PI analyst Pardeep Sangha.

Yesterday, after market, Avigilon reported its Q1, 2013 results. The company earned $2.79-million on revenue of $32-million, which was an increase of 80% over last year’s Q1 topline of $17.8-million.

CEO Alex Fernandes said the industry’s prevailing winds are at the company’s back.

“The transition from analog to high-definition surveillance technology is proceeding rapidly,” he said. “For the first time, our industry will see high-definition surveillance sales outpace analog sales, and we continue to be at the forefront, leading this shift. With that in mind, we will add to our global sales team, continue to expand our product portfolio and invest in marketing to increase brand awareness. We believe these efforts best position Avigilon to maximize revenue growth and long-term profitability.”

Sangha says Avigilon’s efforts to expand its sales distribution network globally over the past year are now paying off. Avigilon, he says, is beginning to establish a track record of beating consensus estimates, making the company’s stated goal of reaching $500-million in revenue by fiscal 2016 more and more believable as time goes on. Noting that the company’s gross margins improved from 48% to 51% between Q1 2012 and Q1, 2013, Sangha says he believes Avigilon deserves a deserves a premium valuation because it is one of the fastest growing technology companies in Canada. In a research update to clients maintained his our BUY recommendation on Avigilon and increased his 12-month target price from $18 to $21.00.

Sangha says he believes Avigilon is well positioned to continue its growth because it is launching in new geographical territories, expanding its sales networks and introducing new products. He expects the company will post EBITDA of $26.4-million on revenue of $159.1-million in fiscal 2013, and that those numbers will rise to EBITDA of $45.3 and revenue of $225.1-million the following year.

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