2019 is a transition year for DIRTT Environmental, Industrial Alliance says

Ahead of the company second quarter results, Industrial Alliance Securities analyst Neil Linsdell is suggesting investors take a pass of DIRTT Environmental Solutions (DIRTT Environmental Solutions News, Stock Quote, Chart TSX:DRT)

On Tuesday, DRT will report its Q2, 2019 results. Linsdell says he expects the company will post revenue of $89.6-million, a topline that would be up 8.6 per cent over the $80.7-million the company reported in the same period last year.

The analyst says he does expect some pressure on profitability and adds that he sees 2019 as a transition year for DRT.

“With a mostly changed, and beefed up, senior management team, DIRTT is finalizing restructuring efforts and establishing a platform for sustainable growth that will also deliver strong profitability and cash generation,” he says. “Management is planning to present its three- to five-year strategic plan in Q3; although we do not expect any dramatic changes to the existing business plan, we do anticipate more insight into efficiency improvements, capacity additions, and a more focused sales & marketing strategy, towards scaling operations to support growth initiatives. We expect this plan to also establish a roadmap towards a higher growth rate into 2020.”

In a research update to clients today, Linsdell maintained his “Hold” rating and one-year price target of $8.50, implying a return of 17.4 per cent at the time of publication.

The analyst thinks DIRTT will post Adjusted EBITDA of $56.9-million on revenue of $386-million in fiscal 2019. He expects those numbers will improve to EBITDA of $65.7-million on a topline of $425-million the following year.

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