Echelon Capital Markets analyst Amr Ezzat thinks it\u2019s time to capitalize on Calian Group (Calian Group Stock Quote, Chart, News, Analysts, Financials TSX:CGY), maintaining a \u201cBuy\u201d rating and target price of $85\/share for a projected return of 40 per cent in an update to clients on Tuesday. Originally incorporated in 1982 in Ottawa and working as a publicly traded company since 1993, Calian Group provides business services and solutions in the areas of health, defense, security, aerospace, engineering, AgTech and information technology (IT) in Canada, the United States and Europe. In addition to his financial outlook, Ezzat also bestowed Top Pick status upon Calian Group. \u201cWe continue to see the recent share price weakness as an opportunity to consolidate a position in a quality operator with a solid track record of value creation,\u201d Ezzat said. Of particular interest, Ezzat drew attention to the company\u2019s fourth quarter financial results, released in conjunction with year-end figures in November, highlighted by a 35 per cent year-over-year growth in EBITDA at $14.9 million, as well as having $25.1 million available in free cash flow, which includes a working capital contribution of $16.4 million compared to a small drag in 2020. The company\u2019s $127.6 million sales report met estimates, representing year-over-year growth of 3.7 per cent to give the company a year-end revenue total of $518.4 million. \u201cWe have never had more technology assets than we have right now and we continue to invest in new assets quarter over quarter,\u201d said Kevin Ford, Chief Executive Officer of Calian Group in the company\u2019s November 24 press release. \u201cOur unrelenting focus on customer retention means that customer satisfaction remains strong despite the challenges posed by COVID-19. We also diversified our customer base, expanding our military training footprint from Canada only to Europe, becoming one of the leading training partners for NATO in Europe.\u201d \u201cThe end of our fiscal year marks multiple key indicators at record levels,\u201d added Patrick Houston, Calian\u2019s Chief Financial Officer. \u201cOur third consecutive year of double-digit growth, coupled with our highest gross margins and EBITDA margins, indicates our efforts to grow profitably were successful in 2021. In FY22 as in FY21, we will seek opportunities to deploy capital through internal initiatives to harvest our assets, as well as new M&A transactions.\u201d Ezzat also acknowledged the company\u2019s shift in priorities, noting that the stock has tripled in value over the last three years as it moved from the philosophy of steady revenue and earnings to trying to more aggressively capitalize on growth. \u201cWe argue that the Street has consistently underestimated valuation by failing to recognize the accretion potential of M&A on Calian\u2019s earnings and more importantly on its valuation,\u201d Ezzat said. "We believe using EBITDA\/earnings multiple on short-term earnings estimates significantly (and incorrectly) undervalues Calian\u2019s shares as it gives no recognition to the Company\u2019s inorganic growth activity (and indeed, its underleveraged balance sheet).\u201d Calian Group is also near the one-year anniversary of its acquisition of Dapasoft, a Toronto-based provider of digital transformation products and services for the healthcare industry, for $50 million ($43 million in cash, $7 million in shares), plus $33 million in earnouts over the next two years, which Ezzat notes could add as much as 20 per cent to Calian\u2019s run-rate EBITDA\/share if the earnout targets are met. With Calian having announced its 2021 year-end totals, Ezzat\u2019s analysis introduces financial projections for 2022, setting his revenue forecast at $570 million for a potential year-over-year increase of ten per cent and his fiscal 2022 EBITDA at $58.0 million, while his Adjusted EPS forecast is set at $3.82\/share. From a valuation standpoint, Ezzat foresees continued improvement for Calian, as he projects the company\u2019s EV\/Revenue multiple to dip from 1.2x in 2021 to 1.1x in 2022, the EV\/EBITDA multiple to drop from the reported 11.8x in 2021 to a projected 10.6x in 2022, and the price-earnings multiple to drop from the reported 17.6x in 2021 to a projected 16.1x in 2022. Overall, Ezzat believes Calian Group has proven itself worthy of a longer look from potential investors. \u201cCalian is a quality diversified operation with a deep bench, an underleveraged balance sheet, and a solid track record of value creation through acquisition and innovation,\u201d Ezzat said. \u201cCGY has all the bells and whistles an investor would seek out in a quality company.\u201d Calian Group\u2019s stock price has dropped by 7.1 per cent over the last year, levelling out overall after hitting a 52-week high of $66.90\/share on March 2, then hitting a low of $53.91\/share on May 26.