Can Imaflex’s stock beat the market?

Beacon Securities analyst Donangelo Volpe maintained a “Buy” rating on Imaflex (Imaflex Stock Quote, Chart, News, Analysts, Financials TSXV:IFX) but trimmed his target to $1.70 from $2.00 following a softer-than-expected third quarter.

Volpe noted that Q3/25 revenue came in at $27-million, up 4% sequentially but down 3% year-over-year and below his $29-million forecast. He attributed the decline to competitive pricing pressure and lower sales of metalized agricultural film, partly offset by stronger overall volumes and higher-margin converted products.

Gross margin of 16% was slightly ahead of his estimate, but operating expenses were higher than expected, particularly SG&A at $2.9-million, or 10.5% of sales.

“Weaker-than-anticipated topline combined with elevated OPEX levels drove Adjusted EBITDA and EPS below our estimates,” he said.

Adjusted EBITDA was $3.1-million (11% margin) versus his $3.8-million forecast, while EPS was $0.01, down from $0.03 a year earlier.

U.S. operations “remain a drag,” with sales of $17-million, down 13% year-over-year. Volpe noted hesitancy among U.S. customers to source from Canada, though management signalled a “cautiously optimistic” outlook for Q4 and fiscal 2026 as converting, bag-making and construction demand shows signs of improvement.

He said the converting side offers a healthier margin profile, supporting the case for margin recovery through 2026, though he lowered some growth assumptions.

Imaflex’s balance sheet remains a bright spot, with $24-million in liquidity, including $12-million in cash and an undrawn $12-million credit facility, and no long-term debt. Volpe expects the company to keep building its cash position but said tuck-in U.S. acquisitions remain possible.

The analyst said the stock appears undervalued, trading at 4.0× FY26 Adjusted EBITDA and 7.7× earnings, with new extruders set to be fully ramped by the end of 2026, effectively doubling multi-layer film capacity, though softness in U.S. operations supports a lower target.

Volpe said Imaflex should generate $12.9-million in Adjusted EBITDA on $108.8-million of revenue in fiscal 2025, improving to $13.3-million on $111.1-million in fiscal 2026.

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