5N Plus (VNP, $ 3.64): An Underrated Small Cap
It is time for this little-known company to pass on the radar of investors, believes Frdric Tremblay, of Desjardins Capital Markets, who is issuing a buy recommendation on the title of producer of special metals.
The company has made progress in being more efficient and improving its margins, the analyst believes. He notes that the company’s earnings before interest, taxes, depreciation and amortization (EBITDA) have exceeded expectations in the previous three quarters.
5N Plus is also focusing its efforts on value-added outlets. His new agreements in the sector of 3D printing, active substances (pharmaceuticals) and satellites are a demonstration of this, he said.
In the fourth quarter, Frdric Tremblay expects EBITDA to increase by 35% to reach US $ 6.1 million (US $ million). If it materializes, it would mean that management’s annual forecast (US $ 25-28 million) would be exceeded at US $ 28.3 million.
At the end of the day, 5N Plus is an unrecognized company that is not valued at its fair value, the analyst believes. He notes that “the accumulation of good news and low valuation” is starting to gain market attention.
It improves its target price from $ 3 to $ 4.50, which represents 8 times the enterprise value / earnings before interest, taxes and depreciation (EBITDA) ratio expected in 2022. Before, it used a ratio of 6 times the 2021 forecast.