A contract with an unnamed Fortune 100 client that is proving more lucrative than originally thought has Laurentian Bank Securities analyst Elizabeth Johnston raising her price target on DIRTT Environmental (DIRTT Environmental Stock Quote, Chart, News: TSX:DRT).
On August 2, DIRTT reported its Q2, 2017 results. The company lost (U.S.) $2.87-million on revenue of $70-million, a 14.3 per cent increase over the same period last year.
“Our sales, marketing and business development investments over the past year are starting to pay off, and I expect continued top-line growth throughout the remainder of 2017,” said CEO Mogens Smed. “Our recent project agreement for a Fortune 100 client has grown from 17 project locations to 66, two-thirds of which are slated for completion in the latter half of 2017 and through 2018.” There is opportunity for continued growth beyond the current scope.”
Johnston notes that the quarter came in below hers and the consenus estimates, but says this was overshadowed by the aformentioned contract.
“On April 25/17 DIRTT announced a US$5M new contract for 17 locations (~US$300k/location),” the analyst explains. “This contract has been increased to US$32.7M (~C$42M) and now includes 66 locations (~US$500k/location; increase related to scope, installation revenue). The Fortune 100 client has over 400 locations worldwide, and we believe that a further increase in the project size is highly likely (though timing uncertain).”
In a research update to clients today, Johnston maintained her “Buy” rating, but raised her one year price target on DIRTT Environmental from $8.50 to $9.50, implying a return of 62 per cent at the time of publication.
Johnston thinks DIRTT will post EBITDA of $30.5-million on revenue of $310.9-million in fiscal 2017. She expects those numbers will improve to EBITDA of $54.5-million on a topline of $389.7-million the following year.