Shares of International Road Dynamics (International Road Dynamics Stock Quote, Chart, News: TSX:IRD) have doubled in the past year, but Cantor Fitzgerald Canada analyst David Tomljenovic thinks the stock still has considerable upside.
Yesterday, International Road Dynamics reported its Q2, 2016 results. The company earned $368,006 on revenue of $15.28-million, a topline that was up 17.9 per cent over the same period last year.
“Our strong presence in the North American ITS markets continued to drive our growth and solid operating performance in fiscal 2016,” said CEO Terry Bergan. “We were also pleased to see year-to-date growth in our recurring service and maintenance business underpinning our strong cash flow and a reflection of our solid reputation in all our chosen markets. Looking ahead, we believe fiscal 2016 will be another solid year for IRD as our backlog of confirmed orders continues to grow and we see an increased number of new, near-term business opportunities. Over the longer term, we are in a strong position to capitalize on the positive fundamentals in the global ITS business as governments and the private sector continue to invest in systems and solutions to enhance highway and roadway infrastructure.”
Tomljenovic says offerings IRD has already developed still have a lot of runway.
“IRD’s quarter was generally in line with our expectations,” says the analyst. “The top line beat shows there is strong demand for products in this marketplace, albeit lower margin products this quarter. The macro trend focusing around congestion is one that will never go away, so there is a long cycle for IRD to take advantage of. We believe that products such as VectorSense are the future for IRD. Greater sensing capabilities produce increasingly valuable and more highly sought after data that will be extremely profitable for IRD. Additionally, the market has accepted the product’s pricing. Next generation sensors selling at market rates will begin to transform IRD’s gross margins which will flow down in a levered manner to the company’s EBITDA and net income lines. The launch of new sensors should begin later in 2016. Investors should be focusing on the future opportunities that already exist within IRD.”
In a research update to clients today, Tomljenovic maintained his “Buy” rating and one-year price target of $2.50 on International Road Dynamics, implying a return of 51 per cent at the time of publication.