Is Imaflex still undervalued?

Beacon Securities analyst Donangelo Volpe maintained a “Buy” rating and $2.00 target price for Imaflex (Imaflex Stock Quote, Chart, News, Analysts, Financials TSXV:IFX) in an Aug. 28 report, saying the shares remain undervalued despite a weaker-than-expected second quarter.

Montreal-based Imaflex manufactures polyethylene films for packaging and agricultural use, operating facilities in Quebec and North Carolina.

The company posted Q2 2025 revenue of $26-million, down 9% sequentially and 8% year over year, below Volpe’s forecast of $31-million.

“The revenue decline was attributable to lower sales volumes and pricing adjustments, with the miss versus our estimates mostly related to the ramp-up of new extruders being slower than we had modelled,” he said.

Gross margin was 14%, short of his 15% estimate and down from 22% last year, when mix effects boosted margins. Adjusted EBITDA was $3-million, or 11% of revenue, versus his $4-million forecast and a 49% decline year over year. EPS was breakeven, compared with his $0.03 forecast and $0.07 a year earlier, though adjusted EPS excluding one-time cybersecurity costs was $0.02.

Geographically, Canadian revenue, which made up 37% of the total, rose 24% year over year, but this was offset by a 21% decline in the United States, which contributes 63%.

“U.S. business was mostly impacted on the extrusion side, with slight outperformance coming through the converting side,” Volpe said.

He added that U.S. demand showed signs of recovery in Q3 across converting, bag making and construction.

“With the converting side offering a slightly healthier margin profile than extrusion, we remain optimistic that topline and margin growth will resume through the second half of the year,” he said.

Imaflex ended the quarter with $23-million in liquidity, including $11-million in cash, a fully undrawn $12-million credit line and no long-term debt. Volpe said the company is expected to keep building its cash reserves but “we believe there remains tuck-in acquisition opportunity in the United States that would help accelerate growth.”

He projected $4- to $5-million in capital expenditures through fiscal 2026 tied to new extruder capacity, with further additions possible in fiscal 2027.

Looking ahead, Volpe forecasts Adjusted EBITDA of $14.6-million on $113.0-million of revenue in fiscal 2025, followed by $15.6-million on $125.1-million in fiscal 2026.

“Trading at 3.8 times our FY2026 Adjusted EBITDA forecast and ramping up new extruders which essentially double multi-layer film capacity, we continue to believe the stock is undervalued,” he said. “We view today’s price action as an excellent buying opportunity.”

-30-