Imaflex is an undervalued stock, Beacon says

Imaflex (Imaflex Stock Quote, Chart, News, Analysts, Financials TSXV:IFX) is wrapping up strong momentum from 2024 and rolling into 2025 with bigger growth plans, says Beacon Securities, which maintained its Buy rating and $2.00 target after a standout year of rising sales and free cash flow.

In his April 24 investors’ note, Beacon Securities analyst Donangelo Volpe cites strong 2024 results, improving free cash flow and expanding production capacity as key drivers of continued growth for Imaflex.

“IFX reported FY24 revenue of $110-million vs our estimate of $111-million,” Volpe said. “Revenue improved 17% y/y, attributable to improved product mix, higher sales volumes, and favourable FX movements.”

Volpe said the improved product mix helped the gross margin grow to 16%, up from 12% last year.

“EBITDA totalled $14-million vs our estimate of $15-million up 2x+ (excluding FX, EBITDA was up 89% y/y) from $6-million last year,” he wrote. “Net income improved to $7.5-million ($0.14 EPS) from $0.5-million ($0.01 EPS), and the company generated $12-million in FCF throughout the year, indicating a 20% FCF Yield.”

He said Imaflex is in a strong financial position, with $21-million in available cash and credit, including $9-million in cash on hand, a fully unused $12-million credit line and no long-term debt

“We anticipate that the company will continue to prioritize building out its cash position utilizing its free cash flow, but believe there remains tuck-in acquisition opportunity in the United States that would help accelerate growth,” Volpe said.

Volpe said Imaflex’s operational execution and balance sheet strength give the company a solid foundation heading into 2025.

“Imaflex posted a strong finish to 2024 with a 17% y/y revenue increase and free cash flow yield of 20%,” Volpe wrote. “We continue to believe the stock is undervalued, trading at just 3.6x our FY25 EBITDA forecast.”

Volpe expects that Imaflex will generate $16.6-million in adjusted EBITDA on $120.7-million in revenue in fiscal 2025.

“We expect ramp-up of the new extruders (typically an 18-month ramp-up) which essentially doubled its multi-layer film capacity to drive revenue towards another year of double-digit growth in 2025,” Volpe said.

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