Q2: 32% Revenue Growth with 110% EBITDA Growth…What a Quarter, I don’t understand why this company doesn’t get a higher multiple given the operational leverage their business now has from its defensible increased gross margin from its patented metalized technology and the amount of EBITDA growth they are putting up.
Revenue
4th consecutive Q of accelerating revenue growth on the back of strength seen across product lines. The story has to be the gross margin. You could easily make the case for a 20% gross margin by years’ end.
Profitability
4th consecutive Q of accelerating EBITDA as margins continues to expand to over a 10% EBITDA margin, adjusting out FX transitions and you are doubling EBITDA with revenue up 32%. The operational leverage here is huge with EBITDA growing at 3x the rate of top line.
Outlook
EBITDA margin should continue to expand as more Shine XL revenues and higher gross margin get brought into the revenue mix. Using a 20% gross margin and a 7.5% of revenues for Selling & Admin gets you to EBITDA in 2018 of 12.5M on revenues of 100M.
On Valuation: Since EBITDA growth is so strong and as gross margin expands a higher valuation multiple should be placed on Imaflex. Using a 10-12x EBITDA multiple on my estimate gets you a stock price range of 2.50 – 3.00/share or 2.75/share at the midpoint or over 115% upside!!!
Added late in the day as the price action made no sense to me. Q1 it took a week or so for the street to realize the value. Anything under 2.00/share is an absolute steal.
LONG