This tech company issued a great quarterly earnings report and the stock price has edged up. Watch for brief dips before buying.
Avigilon Corp. (AVO.TO) or (AIOCF)
From Cabot Benjamin Graham Value Investor, Cabot Enterprising Model
Avigilon Corp. (AVO.TO) or (AIOCF) is a leading designer, manufacturer and marketer of network-connected video surveillance systems, surveillance cameras, and video analytics (software that scrutinizes video input).
Customers include police departments, schools, hospitals, prisons, airports and public transportation systems. Avigilon provides the security video systems for San Diego’s public transit system, Toronto’s Rogers Centre stadium, the entire University of Tennessee campus, the Fulton County School System in Atlanta, Georgia and many other venues. Avigilon is headquartered in Vancouver, British Columbia.
Avigilon’s research goal is to upgrade surveillance cameras to high-definition quality, enabling customers, such as retailers and governments, to protect against theft or terrorism by providing detailed images usable in court or usable by facial recognition software. The company’s cameras can identify faces and license plates from 46 meters (150 feet) away.
Management plans to continue growing sales, but with a “stronger focus” on increasing profitability. Avigilon sales have been strong during the past five years, but earnings have been lagging. Now, the company’s earnings will likely grow at a much livelier pace. Avigilon reported stellar second-quarter results which sent shares 11.5% higher. Sales climbed 16% and EPS popped 250%. Sales received a boost from market share gains, new product introductions and broader adoption of video analytics. Research and development expenses and marketing expenses leveled off after large expenditures in previous quarters.
New lower-priced surveillance systems and reduced prices on older high-priced systems is boosting profits and providing consistent sales growth. Management’s strategy is creating noticeably more sales volume, as Avigilon begins to take significant market share from larger rivals. Avigilon’s new earnings growth path has helped propel the company’s stock price substantially higher during the past nine months and bodes well for the future.
Avigilon boasts a strong balance sheet with modest debt and strong cash flow. The current 15.1 P/E based on current EPS, is easily justified by Avigilon’s growth prospects. I expect Avigilon’s shares to rise 85% and reach my Min Sell Price of 30.68 on the Toronto Stock Exchange or 24.86 on the U.S. Over-the-Counter market within two years. Buy at or below 17.08 on the Toronto Stock Exchange (AVO.TO) or 13.84 on the U.S. Over-the-Counter market (AIOCF).
The pickup in Avigilon’s share price and increase in share volume has been caused by the company’s second-quarter sales and earnings report. Avigilon reported stellar quarterly results which sent shares 11.5% higher. Sales climbed 16% and EPS popped 250% after sales increased 15% and EPS fell 25% in the prior quarter. Sales received a boost from market share gains, new product introductions and broader adoption of video analytics.
Research and development expenses and marketing expenses leveled off after high expenditures in previous quarters. Management stated that R&D and marketing expenses will increase in line with sales increases in future quarters.
Avigilon shares have been on a bumpy ride for the past several years, and now investors are convinced that sales and earnings will climb steadily in the future. The wild ride in previous years was accentuated by steep rises and falls accompanied by heavy volume.
In my opinion, Avigilon’s stock price has consolidated sufficiently after its 11.5% jump on August 10 and is ready to run.
J. Royden Ward, Cabot Benjamin Graham Value Investor, Cabot Enterprising Model, cabotwealth.com, 978-745-5532, September 7 and 8, 2017