Paradigm Capital analyst Daniel Kim has been negative on ATS Automation Tooling Systems (TSX:ATA) for years, but the company’s continued progress has turned him into a believer.
Last Thursday, ATS reported its fourth quarter and fiscal 2015 results. In the fourth quarter, the company posted EBITDA of $35.2-million on revenue of $289.4-million, a topline that was 44% higher than last year’s Q4.
“Fourth-quarter performance was strong, with record order bookings, revenues and continued strong operating margins,” said CEO Anthony Caputo. “Organic growth was strong, PA’s performance was positive and the early synergies resulting from our combined businesses are encouraging. We remain focused on our grow, expand and scale strategies to create value organically and through acquisition.”
Kim says the quarter was better than expected “across the board”. He notes that the company is displaying “impressive earnings leverage” and that last summer’s acquisition of German-based engineering-based automation services firm M+W Process Automation (PA) is contributing.
“We are extremely heartened by the clean sweep this quarter and all forward metrics are looking very solid,” said Kim. “The integration of PA is largely complete, with solid EBITDA accretion delivering on the mark; the next catalyst for value will be EPS accretion, expected later this year. ATA will continue with restructuring efforts over the next six months (~$3M total costs with payback period of less than a year) to better position itself as new opportunities arise and further PA synergies are realized.”
In a research update to clients Friday, Kim upgraded ATS Automation Tooling Systems from “Hold” to “Buy” and raised his one-year target price on the company’s stock from $14.25 to $19.00, implying a return of 31% at the time of publication.