A quarter that “blew past consensus” has Haywood analyst Pardeep Sangha raising his price target on Avigilon (Avigilon Stock Quote, Chart, News: TSX:AVO).
On Tuesday, shares of Avigilon soared, closing up nearly 40 per cent after the company reported Q3 results that bested expectations by a wide margin.
In its Q3, Avigilon earned (U.S.) $3.43-million on revenue of $95.8-million, a topline that was a 32 per cent increase over the same period last year.
“In the strongest quarter in Avigilon’s history, we delivered on our five-year revenue goal, and generated record revenue and profit,” said CEO Alexander Fernandes. “With our revenue goal met, we plan to continue growing with a stronger focus on increasing profitability.”
Sangha notes that Avigilon’s revenue number “blew past” the street consensus of $89.1-million and more than doubled the consensus Adjusted EBITDA number of $8.0-million. The analyst notes that on the conference call to discuss the quarter, management underscored that it would have an increased focus on profitability, having achieved its oft-stated goal of achieving an annual revenue run rate of (C) $500-million.
Sangha says the stock still looks cheap.
“We believe Avigilon is undervalued,” said the analyst. “Avigilon is currently trading at 5.1× EV/EBITDA of our CY17 estimates, which is below the peer group average of 9.3× EV/EBITDA of CY17 consensus estimates. Our target price represents a 10.5× EV/EBITDA multiple to our FY17 Adj. EBITDA estimate, or 8.0x EV/EBITDA multiple of our FY18 Adj. EBITDA estimate.”
In a research update to clients today, Sangha maintained his “Buy” rating on Avigilon, but raised his one-year price target on the stock from (C) $19.00 to $20.00, implying a return of 148.8 per cent at the time of publication.
Sangha believes Avigilon will post Adjusted EBITDA (All figures in USD) of $48.2-million on revenue of $353.2-million in fiscal 2016. He expects these numbers will improve to EBITDA of $67.7-million on a topline of $419.8-million the following year.