Is Element Fleet Management undervalued?

Brianne Gardner, senior wealth manager at Raymond James’ Velocity Investment Partners, said she sees more upside for Element Fleet Management (Element Fleet Stock Quote, Chart, News, Analysts, Financials TSX:EFN) after a strong stretch of performance and new growth initiatives that are broadening the company’s reach.

Element Fleet, based in Toronto, is one of the world’s largest fleet managers, providing financing and maintenance services for corporate vehicle fleets across North America, Australia and Mexico. Speaking on BNN Bloomberg’s Market Watch on Sept. 30, Gardner said the company continues to deliver “steady earnings [and] strong cash flow,” while rewarding shareholders through buybacks and a rising dividend.

“What I think is exciting is how they’re broadening the business,” she said. “They’re moving into smaller fleets and launching Element Mobility, which is a new platform that uses partnerships in AI and telematics to make fleet management smarter. So they are tapping into that space and management is also being tactical.”

She pointed to management’s decision to delay some asset sales until new tax rules take effect, a move that could lift revenue once the rules are in place. Gardner described Element as “a steady compounder in this sector that often flies under the radar,” adding that the stock looks slightly oversold on relative-strength indicators, presenting a “favourable entry point.”

Gardner sees roughly 17% to 20% upside from current levels, with a price target of around $42. The stock reached $38.01 in mid-September before easing back to the $35 range, but has significantly outperformed since its April low.

“You see the three-month [performance], the stock’s up 8%, six months up 26%, 12 months up 29%. I think the stock has done very well,” she said, citing a private debt offering and buyback activity as additional tailwinds.

Element Fleet shares have gained 24.96% over the past 12 months and 221.3% over five years. Of the 10 analysts covering the stock, eight rate it “Buy” and two “Hold,” with a consensus target price of $41.80.

Shares closed Oct. 1 at $36.26.

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