With its share price down 18.5 per cent since May, Echelon Wealth Partners analyst Amr Ezzat thinks it’s the perfect time for investors to be picking up some Pure Technologies (TSX:PUR).
In a research update to clients today, Ezzat maintained his “Buy” rating and one-year price target of $7.00 on Pure Technologies, implying a return of 47 per cent at the time of publication.
Ezzat says he attributes the sell-off in shares of Pure not to the company specifically, but to a general selloff in names that are exposed to Alberta or energy. The analyst, however, says this is wrongheaded as the current oil and gas macro environment simply has no bearing on the company’s operations. He believes the company is set up for a year of outperformance.
“The Company’s recent blockbuster Q117 is the beginning of what we foresee to be a stellar year of execution: The Company’s results showcased excellent cost execution and improved margins on most fronts,” the analyst says. “More significantly, we think the best is yet to come as early as Q217. Conference call commentary suggests the Company is currently firing on all cylinders.”
Ezzat thinks Pure Technologies will post Adjusted EBITDA of $23.9-million on revenue of $136.9-million in fiscal 2017. He expects those numbers will improve to EBITDA of $26.8-million on a topline of $159.0-million the following year.
The Echelon Wealth Partners analyst says Pure has plenty of runway.
“There are an estimated 240,000 water main breaks per year in the US and it is estimated that restoring existing water systems will cost $1T over the next 25 years. Given the growing funding gap, cost-effective tools (such as Pure’s) to assess the conditions of the pipes help clients avoid premature replacement of sound pipes in order to save resources and time. In many cases, for a fraction of the replacement amount (~5-7%), Pure’s services and technologies enable the utility to identify and target the deteriorated parts of the pipe (in many cases 90-99% of the pipe is still in good condition).”