Is Volatus Aerospace undervalued? Yes, says Echelon

Following the announcement of a new U.S. contract, Echelon Capital Markets analyst Rob Goff remains bullish on Volatus Aerospace (Volatus Aerospace Stock Quote, Chart, News, Analysts, Financials TSX:VOL)

On September 8, VOL announced that it had signed a contract with an unnamed client it described as a “leading energy company headquartered in the U.S.”

“Our experience and expertise put us in a strong position to capture a market opportunity that is expected to grow to $1.1-billion (U.S.) by 2033,” said Glen Lynch, chief executive officer of Volatus Aerospace, noting that Volatus expects to grow to an annualized revenue of up to $4-million in 2024 with EBITDA (earning before interest, tax, depreciation and amortization) margin of 10 per cent, in line with our past performance from this services segment in Canada.

Goff put the contract into perspective.

“The US has an oil and gas pipeline network of approximately 4.2M kilometres, which is five times larger than the Canadian network,” the analyst noted. “This contract represents the Company’s aim to tap into a growing market opportunity where the US oil and gas pipeline industry is expected to reach a value of US$1.1B by 2033. Energy companies and pipeline operators use piloted aircraft and drones to ensure the safety and compliance of their infrastructure. The size of the pipeline determines the frequency of aerial inspections, which are highly regulated and range from daily, quarterly, and yearly. The Company highlights its competitive advantage given its proprietary technology – Aerial Information Reporting System (AIRS3), partnerships with AI and advanced sensor companies, and its ability to offer drone technology to replace piloted aircraft, reducing financial and environmental impacts to wildlife.”

In a research update to clients September 11, Goff maintained his “Buy” rating and one-year price target of $0.75 on Volatus, implying a return of 241% at the time of publication.

Goff thinks VOL will post an EBITDA loss of $2.6-million on revenue of $43.2-million in fiscal 2023. He expects those numbers will improve to EBITDA of positive $1.8-million on a topline of $60.7-million the following year.