Zedcor is undervalued, this analyst says

Ventum Capital Markets analyst Amr Ezzat reiterated his “Buy” rating and $8.70 target on Zedcor (Zedcor Stock Quote, Chart, News, Analysts, Financials TSXV:ZDC), saying the company’s fourth-quarter results and conference call reinforced the view that the business remains on track as it scales its mobile surveillance network.

On April 9, Ezzat said revenue of $17.9-million came in broadly in line with his $18.1-million estimate and modestly below the Street’s $18.5-million, while Adjusted EBITDA of $7.1-million beat both his and consensus forecasts of $6.5-million. EBITDA margin was about 40%, ahead of his 36% estimate.

The analyst said the quarter did not change the broader thesis, with manufacturing running at 40 to 50 towers a week and management reiterating its 2026 build target of 1,800 to 2,000 towers, broadly in line with Ventum’s forecast of 1,987, and an exit fleet of about 5,000 towers.

Revenue rose 11.6% from the prior quarter and 73.0% from a year earlier, driven by fleet growth, strong demand in Canada and the U.S., and higher contribution from existing customers. Zedcor deployed 435 towers in the quarter, bringing the fleet to 2,786, above Ventum’s 2,745 estimate and up from 2,351 in the prior quarter and 1,337 a year earlier. Management said utilization remained strong, though the company is now operating closer to 85% rather than above 95% in order to maintain inventory and improve deployment speed.

Ezzat said sales capacity, not manufacturing, remains the main constraint. Management was clear that demand is not the issue and is instead focused on expanding the sales organization, improving training and lifting productivity. He added that the enterprise pipeline continues to build even without a major new customer announcement, with clients scaling from small trials to deployments of 50 towers or more. Retail remains slower because of RFP cycles, though upcoming contract rollovers could act as a catalyst.

Gross margin held near 62%, though management flagged possible modest near-term pressure as U.S. expansion continues. The U.S. accounted for 43% of revenue in the quarter, up from 36% in 2025, and management said the U.S. daily revenue run rate is now above Canada’s.

Capital spending was $22.3-million as the company continued investing in fleet growth and manufacturing capacity, resulting in negative free cash flow of $16.1-million. Zedcor ended the quarter with net debt of $38.4-million and, after year-end, expanded its credit facility to $75.0-million and raised $30.5-million in a bought deal at $6.00 a share.

“We view Zedcor as a high-return, infrastructure-like network that is still early in its build phase,” Ezzat said, arguing that reported returns understate the underlying economics while the company continues to reinvest. He said the model is supported by mobile surveillance assets that pay back in under two years and generate about 65% tower-level margins, with a clear path to higher returns as the network matures.

Ezzat said Zedcor should generate Adjusted EBITDA of $21.8-million on revenue of $58.9-million in fiscal 2025, improving to Adjusted EBITDA of $38.7-million on revenue of $101.5-million in fiscal 2026.

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