Laurentian Bank Securities analyst Nick Agostino is still curious about the growth of Calian Group (Calian Group Stock Quote, Chart, News, Analysts, Financials TSX:CGY), maintaining a “Buy” rating and $80/share target price for a projected return of 39.6 per cent in an update to clients on Thursday.
Founded in 1982 and headquartered in Ottawa, Calian Group provides products, business services and solutions to a range of government, defense and commercial customers, segmented into Advanced Technologies, Health, Learning and IT operating units.
Agostino’s updated analysis comes after Calian Group hosted its Annual Investor Day in a virtual format on Wednesday.
“Building on CGY’s successes over the last four years (doubled sales to $600 million, increased GM to 26 per cent, grew EBITDA to $52 million and built a global footprint and customer base through 10 acquisitions), the focus is now on scaling operations, leveraging the company’s technology innovation to reach a target $1 billion in sales,” Agostino said, while noting further expansions to both gross margin and adjusted EBITDA as catalysts for attaining that goal.
With the ten-figure annual run rate now a target for Calian, Agostino noted that the company can build off its position as a leader in the design and manufacturing of antennas, amplifiers, splitters for GNSS systems used by U.S., China, Europe, Russia, Japan and India. In particular, Agostino identified the potential for increased antenna demand due to 5G Network deployments, as well as achieving significant Advanced Tech growth in agriculture, autos, military, and aviation.
Calian is also focused on the digital health solution market, which Agostino estimated to represent a $112 billion opportunity in North America alone. The company has become an incubator for medical tech, of sorts, with its portfolio featuring the Corolar and REXULTI Start virtual care solutions, the Nexi patient communication platform, and Panorama PSP from its Alio subsidiary.
The company also has its eyes on the augmented reality market, as it hopes to capitalize on its estimate of 70 per cent of learning and development being done in an experiential format within the Synthetic Training market, which Agostino estimates to grow from US$12 billion to US$17 billion by 2029.
According to Agostino, Calian also aims a one-stop shop for multi-cloud and hybrid/managed services (MS) offerings, with a greater focus on the mid-market, U.S. expansion and health/government penetration through its Juno360 platform, along with its pending acquisition of the Computex cyber solutions platform.
Calian Group reported its first quarter financial results on February 9, headlined by $129 million in revenue for an 11 per cent year-over-year increase, paired with adjusted EBITDA of $13.9 million (34 per cent year-over-year increase) and adjusted net profit of $9.7 million (41 per cent year-over-year increase), along with a 26 per cent gross margin and $185 million in new contract signings.
“This quarter represents another strong quarter for the Company across many vectors. Our ability to win new deals was evident with strong bookings and delivery. We continue to be well positioned to deliver consistent growth across all our segments.” said Kevin Ford, Calian CEO in the company’s press release. “Our initiative to deploy capital in a way to drive long term value was also evident with the acquisition of SimFront in October to bolster our learning capabilities, and the announcement of the acquisition of Computex in February which will expand our IT practice into the United States.”
Calian Group’s stock price has been largely consistent over the last 12 months at a 1.7 per cent loss, though it has produced a 6.9 per cent loss since the start of 2022. The company’s 52-week high came on March 2 when it closed at $66.90/share, with the 52-week low being $53.42/share on January 24.