Scotia raises target to $27
Well that was great news to wake up to this morning (I'm out West). Sometimes it pays off to plug your nose and keep buying shares of a stock with the fugliest chart of 'em all.
So the Scotia analyst raised his target to $27.00 from $26.00, keeps the Outperform rating. Here's an excerpt from the note.
Much Better Than Feared
OUR TAKE: Once again, there were a number of moving parts in the quarter. Then again, when excluding the puts and takes that we consider “one-time” in nature, there was little changed from the previous quarter’s outlook. That said, given the significant share price decline (and discount valuation), we think the “reiterated” outlook should (at least) alleviate investor concerns on multiple fronts, namely input price pass-throughs and the successful and timely ramp of its WAT facility in Q4 – both of which represent positive read-throughs for 2018. Taken a step further, the results and updated guidance should provide a renewed sense of optimism on the company’s ability to pass-through the majority of its higher input costs and successfully ramp up accretive organic growth projects, which we think should have positive implications on valuation.
As it relates to valuation, despite the run-up, ITP shares reflect a continued unwarranted discount to its peer group. In addition to valuing the 2017E “base business” at a discount, we believe the market is still ascribing zero value to ITP’s “paid-for” organic and strategic growth, that we estimate, once fully-ramped, should be approximately 40% accretive to 2017E EBITDA.
We increased our one-year target to $27/share to account for FX; other than that,
our forecast remain largely unchanged. ITP trades at an 8.9x EV/EBITDA on our (conservative) 2018 estimates. As such, we see potential upside from earnings revisions and multiple expansion as momentum from its growth projects, namely the new WAT facility, Cantech, and Powerband, continue to accelerate.