This Canadian smallcap stock was just upgraded to “Buy”

In a Sept. 11 research note, Paradigm Capital analyst Daniel Rosenberg raised his rating on Haivision Systems (Haivision Systems Stock Quote, Chart, News, Analysts, Financials TSX:HAI) to “Buy” from “Hold” and lifted his 12-month target to $6.50 from $4.50, citing improving growth visibility and operating leverage.

“Overall macro headwinds are stabilizing,” Rosenberg said. “Management was confident in returning to both double-digit growth and EBITDA margins in FY26 and beyond, with the large Navy contract providing good visibility to growth.”

Founded in 2004, Montreal-based Haivision provides video infrastructure solutions for mission-critical applications, generating gross margins of about 70%. The company has a track record of eight acquisitions to date and is repositioning away from lower-margin systems integration toward proprietary product innovation. Rosenberg said those investments are beginning to yield results and should support a constructive 2026 outlook.

Haivision reported third-quarter 2025 revenue of $35-million, up 14.3% year over year and ahead of consensus at $33.2-million. Adjusted EBITDA of $3.5-million was in line with expectations, while EPS of $0.01 missed the $0.02 forecast. Gross margin was 72% compared with 75% last year, reflecting the mix shift associated with the U.S. Navy contract.

Balance sheet metrics showed $10.9-million in cash and $9.9-million in debt at quarter-end, compared with $16.6-million and $7.2-million in Q2. The company repurchased about $1.1-million of shares during the quarter ($3.9-million year-to-date) and maintains a $35-million credit facility, $7.9-million of which is drawn.

A key growth driver is the five-year production agreement secured last September with the U.S. Navy Sea System Command, valued at US$61.2-million (about C$82-million). The deal will see Haivision supply combat vessels and command centers with video processing solutions and mission-critical video walls.

“We believe the win with a best-in-class customer speaks to Haivision’s position as a leading technology offering in the defence sector,” Rosenberg said.

Looking forward, management guided to stable growth in the second half and reiterated confidence in returning to double-digit growth and EBITDA margins in FY26 and beyond. Macro headwinds and tariff-related uncertainty are normalizing, while operating expenses are expected to remain stable. The sales pipeline is expanding with larger deal opportunities.

On valuation, Paradigm applies a blended methodology using a 9.0 times EV/EBITDA multiple and DCF with an 11% WACC and 2% terminal growth rate. Shares currently trade at 6.7 times FY27E EV/EBITDA versus the peer median of 11.9 times.

Rosenberg now forecasts adjusted EBITDA of $9.8-million on $133.6-million in revenue in fiscal 2025, improving to $19.2-million on $145.8-million in fiscal 2026.

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