Industry trends and operational improvements are driving gains at Exco Technologies (TSX:XTC) that have Industrial Alliance analyst Neil Lindsell feeling bullish about the company.
Lindsell today issued a research report on Exco to clients in which he assumed coverage of the company. The analyst promptly gave it a “Top Pick” rating and one year target price of $19.00, implying a return of 33.1% at the time of publication, including dividend.
Lindsell says an industry trend towards lighter, more fuel efficient vehicles is driving growth across all segments of Exco, including its Casting & Extrusion (C&E) and Automotive Solutions (AS). The analyst thinks this is a long term trend.
“Exco’s focus on the automotive market, in both its AS and C&E segments, is allowing it to ride the current wave of auto industry growth. When combined with strategic acquisitions such as Automotive Leather Company (ALC) in South Africa, which brought relationships with BMW and other German OEMs, the Company is experiencing significant revenue growth, which we expect to continue for at least several years,” said Lindsell.
The recovery in the automotive sector is driving gains in companies like car-selling specialist CarMax.
The Industrial Alliance analyst gives the thumbs up to Exco’s geographic expansion, which he says is creating better relationships with its customers.