Analyst RecommendationFrom one of the best, Ryan Irvine. He only recommends about half a dozen stocks a year. GLTA
This week, we have three YSOT segments for your listening pleasure. The first is on IBI Group Inc. (IBG:TSX), a global provider of a range of professional services, including architecture, engineering, planning, and technology solutions. With solid earnings growth and a strong backlog, a listener asks if IBI could be an acquisition target by one of the larger engineering companies such as WSP or Stantec. IBI Group Inc. (IBG:TSX)
Price: $10.82
Market Cap: $338.602 Million
What Does IBI Group Do?
IBI is a global provider of a range of professional services, including architecture, engineering, planning, and technology solutions. It focuses on the physical development and ongoing management of urban environments. Its expertise is categorized into three practice areas: Infrastructure, Buildings, and Intelligence.
Q2 2021 Results:
- Net revenue increased 13% to $113.2 million and was 4% higher than the preceding quarter with 7.6% organic growth.
- Net income in Q2 2021 increased to $8.3 million ($0.22 per basic and diluted share 23% higher than Q2 2020.
- 9% Adjusted EBITDA1margin
- Net debt1to Adjusted EBITDA2 multiple of less than 1 times
2021 Guidance:
IBI increased its 2021 net revenue guidance to approximately $435mm (from ~$422mm), which implies 10.6% y/y growth. On a YTD basis, IBI has achieved net revenue growth of 13.0% y/y. T
Valuations:
Q2/21 backlog was a record $604mm (+17% y/y) and net debt-to-TTM-adjusted EBITDA declined to 0.9x (vs. 1.1x in Q1/21).
As the listener points out, IBI’s quarterly numbers can be lumpy, but it trades at about 15 times next years earnings estimates and 13.5 times 2022 estimates – which is relatively reasonable. Estimates are for 11-12% revenue growth for 2021 and a modest 3% level of growth in 2022 – but this is not factoring in acquisitions which are a potential. Earnings in 2022 are expected to growth 17% which is solid – but not spectacular. We think IBI is a solid business and while we do not expect high growth – 30-50%+, with a strong backlog, the wind at its back in terms of potential infrastructure spending and a decent balance sheet it appears poise to offer above market levels of growth near and mid-term. It is an interesting, well run option and could potentially be a takeover target for a larger firm in the space.