Avigilon is still a buy, says Haywood

Shares of Avigilon (Avigilon Stock Quote, Chart, News: TSX:AVO) are well off their lows from earlier this year, but Haywood analyst Pardeep Sangha thinks the stock still has strong double-digit upside.

On Tuesday, Avigilon will report its Q1, 2016 results. Sangha says he expects the company will report first quarter revenue of $71.5-million and EBITDA of $9.4-million, a figure that represents EBITDA margin of 13.1 per cent and revenue growth of 18 per cent, year-over-year.

Beginning in this reporting period, Avigilon will switch to reporting in U.S. dollars, a change Sangha thinks will result in fewer fluctuations.

The analyst thinks Avigilon will achieve its long-stated goal of achieving an annualized run-rate of (C) $500-million by the end of fiscal 2016, and says he will be looking for an update from management on its previously provided guidance of (U.S.) $335-million to $365-million in revenue for fiscal 2016. He thinks the stock is currently cheap when compared to its peers.

“We believe Avigilon is undervalued given the company’s strong outlook and growth profile, says Sangha. “Avigilon is currently trading at 11.0x EV/EBITDA multiple of our FY1 forecast, which is below its peer group trading at 11.0x EV/EBITDA. Our target price is based on a 10.3x EV/EBITDA multiple of our FY17 estimates.”

In a research update to clients today, Sangha maintained his “Buy” rating and one-year price target of $22.50 on AVO, implying a return of 43.7 per cent at the time of publication.

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