Is Atlas Engineered Products stock a buy?

Beacon Securities analyst Russell Stanley maintained a “Buy” rating and $1.50 target for Atlas Engineered Products (Atlas Engineered Products Stock Quote, Chart, News, Analysts, Financials CSE:AEP) in an Aug. 22 report ahead of second-quarter results, scheduled for release Aug. 29 before market open.

Stanley is forecasting revenue of $14.1-million and Adjusted EBITDA of $2.2-million, compared with the current headline consensus of $15-million and $2.7-million. He noted that the consensus EBITDA figure excludes three outlier estimates of $0.8-million, and including those would lower consensus to $1.7-million.

His forecast assumes seasonal growth over the $11-million in revenue and $600,000 in adjusted EBITDA reported in the first quarter of fiscal 2025, but a year-over-year decline of 7% and 27%, respectively, from $15.1-million and $3.7-million in the second quarter of 2024.

“In addition to the results, we will be looking for an update on the company’s demand picture, its robotic facility in development in Clinton, Ontario, and integration of the $3.8-million acquisition of Penn-Truss in July and the $1.6-million acquisition of TrussWorthy in early June,” he said.

In late July, Finland-based Trussmatic announced a purchase order from Atlas for what it describes as the first fully automated wood roof truss production line in the world. The modular system is designed for greenfield facilities, allowing for standardized deployment across multiple sites.

Atlas closed its acquisition of Penn-Truss in July, adding a facility in Saltcoats, Saskatchewan, its first in the province, providing Prairie-wide coverage with a service radius of 600 kilometres. The $3.8-million purchase included $2.3-million in cash on closing, $760,000 due in April 2026, and another $760,000 payable in cash or stock at Atlas’s option, tied to fiscal 2025 EBITDA performance.

The equipment alone was appraised at $3.1-million. Penn-Truss generated $8.7-million in revenue and $500,000 in normalized EBITDA in fiscal 2024, though its three-year average normalized EBITDA was closer to $955,000. Atlas expects earnings to return to that level in fiscal 2025, implying a 4.0 times purchase multiple on forecast EBITDA.

Meanwhile, housing starts in Canada have outpaced expectations. July starts came in at a seasonally adjusted annualized rate of 294,000, above consensus of 270,000, and up 22% year over year. Raw starts totalled 68,700 in the second quarter, a 13% increase year over year and up 52% sequentially.

On valuation, Atlas trades at 4.2 times Beacon’s fiscal 2026 Adjusted EBITDA forecast, representing a 64% discount to Builders FirstSource, which trades at 11.8 times. Stanley’s forecast assumes Atlas will more than double EBITDA in 2026 with the opening of the Clinton robotics facility, while consensus for Builders FirstSource implies just 5% EBITDA growth.

Stanley projects Atlas will post Adjusted EBITDA of $9-million on revenue of $65-million in fiscal 2025, improving to $19-million on $96-million of revenue in fiscal 2026.

-30-