Mediagrif is undervalued, says Euro Pacific analyst Amr Ezzat

Investors should take advantage of this quiet M&A period to acquire shares of Mediagrif (TSX:MDF), says Euro Pacific Canada analyst Amr Ezzat.

In a research update to clients this morning, Ezzat maintained his “Buy” rating and one-year target of $21.50 on Mediagrif, implying a return of 23.4% at the time of publication.

On February 10th, Mediagrif will report its Q3, 2015 results. Ezzat expects the company will generate EBITDA of $7.0-million on revenue of $17.3-million, slightly below the street consensus topline of $17.7-million.

Ezzat notes that shares of Mediagrif tend to outperform when the company makes an acquisition, and that it has a strong track record of valuation creation through what he describes as “disciplined and accretive acquisitions”. While things are currently quiet on the M&A front, the analyst thinks investors should accumulate shares of Mediagrif, because he believes it is undervalued compared its competitors.

“Peers are trading at a ~27% premium to MDF on an NTM EBITDA basis, despite MDF’s superior FCF generation, healthier return profile, and best in class EBITDA margins (38.6% LTM vs. peers’ 16.5%),” said Ezzat. “While expected top line growth is slower than that of peers, we note that it does not include acquisitions and MDF is growing EPS at a faster pace than comps. We do anticipate the Company to be acquisitive.”

Founded in 1996, Longueuil, Quebec-based Mediagrif offers a range of e-commerce services through B2B platforms such as The Broker Forum, Power Source Online, and Carrus Technologies.

Shares of Mediagrif closed today up 1.5% to $18.00.