Avigilon deserves its premium, says Cantor Fitzgerald’s Justin Kew

Avigilon (Stock Quote, Chart, News: TSX:AVO) shareholders should pay attention to Tyco’s recent acquisition of IP Video Surveillance company Exacq, because the pickup of that Avigilon peer reflects the growing strategic value of industry leaders in the security space, says Cantor Fitzgerald analyst Justin Kew.

Kew says that while the multiple Tyco paid for Exacq was lower than the one Avigilon is currently trading at, the Vancouver-based security player more than justifies this premium because it is larger and growing its revenue more than 50% faster than Exacq is.

The next opportunity for Avigilon to show off its gaudy growth will be on Thursday, August 8, after the market close. That’s when the company will report its Q2, 2013 results.

Kew expects that Avigilon will continue its strong double digit growth, and post revenue of $38.8-million in its second quarter. That number, which is higher than the street’s consensus of $38.4-million, would mean a year-over-year topline increase of 60%. He expects Avigilon’s EBITDA will come in at $5.5-million, also higher than the street consensus of $5.3-million.

In a research update to clients this morning, Kew reiterated his BUY recommendation and $21 target price on AVO. He derives this price by applying 26x his estimate of the company’s fiscal 2014 earnings, or 16x fiscal 2015 earnings.

Shares of AVO closed today down .3% to $18.56.

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