The recent sell-off in this security company’s shares—as well as rising insider buying provides an opportunity to buy at a discount.
Avigilon (AVO.TO)
from Market Insider Bulletin
Avigilon (AVO.TO) designs, manufactures and markets high definition, network-based video surveillance systems for the global security market. Since its IPO in November’11 AVO has been one of the fasted growing Canadian tech companies with 2013 annual revenues of $178 million nearly triple the 2011 revenues. In that period per share net earnings have risen from $0.14 to $0.53. The results for the 1st quarter of 2014, namely, revenues of $55.8 million and net earnings of $0.18/share, point to another record year.
The stock gains have more than matched the expanding revenues and profits. From the IPO price of $4.50 it rose to as high as $34.50 by January’04. At that price AVO traded at a very rich P/E ratio of 65, becoming ripe for profit-taking and selling on any news seen negatively by investors.
It has taken more than six months for AVO to complete a Head-and-Shoulder top. The following sell-off climaxed after the May 6th news that the long serving CFO left the company because of “health issues”.
Four Insiders, including the CEO and the temporary CFO, stepped in during the May’14 selling panic, buying 90,700 shares in the $18-$24.60 range. Looking back at what AVO had done following previous surges in Insider buying featured on these pages (April’12, October’12 and September’13), one must be impressed by their timing and confidence in their company’s potential.
In spite of rapid growth and acquisitions made, AVO has no long-term debt and at the end of March’14 had $112 million in working capital and 44.5 million of outstanding shares. The CEO and the CFO together control nearly 18% of outstanding shares. The chart shows that after briefly penetrating the support at $20, AVO has rebounded from deeply over-sold conditions and, over the last three weeks, its relative strength line has turned up.
The first resistance is the price gap between $24.75 and $26. More substantial resistance will be in the $29-$30 range. I think that in the $20-20.30 range AVO is a high risk/high reward buy with mental stop losses on a close below $19.
Tony Jasansky, Market Insider Bulletin, 106 Neighbourly Lane, Richmond Hill, Ontario L4C 5L7; ajasansky@yahoo.ca, June 2014