Avigilon still has nearly 40% upside, Haywood says

It has been a strong performer this year, but ahead of the company’s third quarter results, Haywood Securities analyst Pardeep Sangha thinks there is still plenty of money to be made on Avigilon (Avigilon Stock Quote, Chart, News: TSX:AVO).

Today, after market close, Avigilon will report its Q3, 2017 results. Sangha thinks the company will generate Adjusted EBITDA of $20.3-million on revenue of $114.3-million, numbers that are better than the street consensus of EBITDA of $18.5-million on revenue of $107.8-million. The analyst says he will be looking at a number of developments in the quarter.

“On the conference call, we will be listening for: Update on annual guidance. Our annual forecast of 18% revenue growth and 16% Adj. EBITDA margins are within the Company’s guidance for CY17 revenue between $390M and $425M (10% to 20% growth), with Adj. EBITDA margins between 13% and 17%; Details and timing of the sale of its office tower building for $107.5M, which was originally purchased for $42M; Pipeline and growth prospects for the second half of the year; Increasing sales in the Company’s new higher margin products; Update on monetizing the IP and licensing division,” Sangha says.

In a research update to clients Monday, Sangha maintained his “Buy” rating and one-year price target of $25.50 on Avigilon, implying a return of 38.9 per cent at the time of publication.

Sangha thinks Avigilon will generate Adjusted EBITDA of $68.2-million on revenue of $416.7-million in fiscal 2017. He thinks those numbers will improve to EBITDA of $88.9-million on a topline of $477.0-million the following year.

Avigilon’s share price has increased 43% this year. Avigilon is currently trading at 10.8x EV/EBITDA of our CY17 estimates, which is below the peer group average of 16.1x EV/EBITDA of CY17 consensus estimates,” the analyst explains. “Our target price represents a 9.9x EV/EBITDA multiple of our CY18 Adj. EBITDA.”