2023-08-21 22:56:51
Savaria has a clear objective to achieve an adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 20% by 2025. (Picture: courtesy)
What to do with the titles of Savaria, Groupe NFI and AYA Gold & Silver? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed.
Savaria (SIS, $16.11): Widening margins might unlock significant value for the stock, says Desjardins analyst
Last week, people from Desjardins held meetings with the management of the company specializing in accessibility solutions for people with reduced mobility. The main element that emerged was a clear objective to achieve an adjusted earnings before interest, taxes and amortization (EBITDA) margin of 20% by 2025. Management is relying on a revenue target of $1 billion in 2025.
For the time being, this is higher than analysts’ consensus forecasts, points out Frederic Tremblay, analyst at Desjardins Securities. This profit margin will be around 16% in 2023, and the analyst consensus forecasts 16.7% in 2024 and 17.6% in 2025.
For the moment, the Desjardins analyst does not modify his forecasts, but he adopts a more positive bias with regard to the prospects stated by the management, and he believes that their objective is not inconceivable.
According to him, the key areas of the company have the necessary capabilities to achieve this goal. North American operations in the accessibility segment already appear to be consistently generating a profit margin of 20%+.
In Europe, however, performance has been weaker recently as the sector faces higher than expected inflation. But the analyst believes these overseas operations will regain some margin momentum thanks to better prices in early 2024 and the introduction of new lifts and hoists in 2024-25.
The analyst believes that an improvement in the profit margin might unlock significant value for the stock, with the potential for share price appreciation between $26 and $34 if the margin reaches 20% in 2025, and between $23 and $30 if it is 18%.
Frederic Tremblay maintains his buy recommendation for the stock, and his price target for the next 12 months is $21.50.
Groupe NFI (NFI, $11.79): well positioned to significantly increase its profits and cash flow
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