DIRTT Environmental Solutions has robust growth ahead of it, says Industrial Alliance

Ahead of its fourth quarter earnings due on Wednesday, analyst Neil Linsdell of Industrial Alliance Securities is maintaining his “Buy” rating for DIRTT Environmental Solutions (DIRTT Environmental Solutions Stock Quote, Chart TSX:DRT), which he sees as likely to benefit from continuing constraints in the construction industry.

Makers of customized prefabricated interiors, DIRTT (which stands for Doing It Right This Time) is reporting its fourth quarter fiscal 2018 financials after market on Wednesday, with robust revenue growth expected, according to Linsdell.

“We expect a strong finish to 2018, after a tumultuous year that saw multiple executive changes,” says Linsdell in a quarterly preview for clients on Wednesday. “Despite these distractions, we believe that the unique corporate culture and distinctive product offering has allowed DIRTT to continue to post solid growth and profitability, helped by the healthcare segment, which we view as one of the more attractive opportunities for the Company. The overall opportunities remain large for DIRTT as we continue to see adoption of the modular construction offering and continuing constraints in labour associated with conventional construction techniques.”

For its Q4, Linsdell is estimating $86.5 million in revenue, a 15.6 per cent year-over-year growth rate, and Adjusted EBITDA of $8.7 million versus a loss of $1.0 million a year prior.

Linsdell says DIRTT’s sector diversification remains strong, with healthcare remaining as the focus, where growing opportunities continue to emerge in the high-margin healthcare sector.

The analyst says he’s maintaining his positive long-term outlook on DIRTT and argues that the market has yet to fully value the company.

“DIRTT’s disruptive approach to the interior construction market and unique scalable business model have proven to deliver impressive results, although this has not yet been fully appreciated by investors or recognized in the share price,” he says.

The analyst today maintained his “Buy” rating and $8.00 target price, which represented a projected return of 11.7 per cent at the time of publication.