Is AlarmForce a Killer Deal Right Now?

Speculation that AlarmForce’s (AlarmForce Stock Quote, Chart, News: TSX:AF) strategic review process is not going well has driven shares of the security provider down, presenting a buying opportunity, says Industrial Alliance analyst Steve Li.

On Thursday, after market close, AlarmForce will report its Q2, 2013 financial results. The Toronto-based company is coming off a Q1 in which it earned $1.37-million on revenue of $11.92-million, besting the same period a year earlier by more than 9%.

Li believes the weakness in AlarmForce’s stock last year was the result of lower profitability that resulted from the launch of VideoRelay, and the company’s expansion into Florida. He says these lows shouldn’t be a proxy, because the company trades at a discount to its peers and management has made it clear that it will reduce its marketing expenditures this year to drive profitability back up.

In a research update to clients this morning, Li maintained his Speculative Buy rating and $14.75 one-year target on AlarmForce.

Founded in 1988 by current CEO Joel Matlin, home security systems manufacturer AlarmForce has grown to more than a quarter-million subscribers in Canada and the US. Last August, with its share price slumping, the company announced it had hired Imperial Capital to assist in a strategic review of its business and opportunities, including a possible sale of the company.

Meanwhile, Li notes that the uptake of VideoRelay, a more advanced video surveillance offering that offers live two-way voice, has had a very promising debut in the U.S., with one-in-five new subscribers signing up. The Industrial Alliance Securities analyst is forecasting Q2 earnings of $1.1-million, or $.09 a share, on revenue of $12.4-million, which would be up 11.8% year-over-year.

More Cantech Analysts