Investors in Evertz Technologies Ltd. should not adjust their screens: Analysts say the static year-over-year performance of the broadcast technology company's stock is temporary.
Many believe shares of Evertz, which brings real-time video and replays to viewers of events such as the Sochi Olympics, are poised to take off thanks to new products it's launching into a market hungry for professional video content.
The Burlington, Ont.-based company's technology is expected to be used in a handful of high-profile broadcast events this year, including FIFA World Cup, the Commonwealth Games and the U.S. mid-term elections.
Analysts believe that these events should help stabilize the company's revenues, which have been lagging until its most recent quarter.
"I think we're at the point now where we are going to start to see a little bit better and a little bit more sustainable growth going forward," said BMO Nesbitt Burns analyst Thanos Moschopoulos, who has an "outperform" rating on the stock and a price target of $18.50.
Evertz designs, manufactures and sells infrastructure hardware and software to the broadcast industry, helping it to process audio and video. Some of its newer technology includes next-generation slow-motion sports replay, work-flow automation software for broadcasting operations, and Internet protocol (IP) routing, which uses less cable and provides more flexibility in how signals are routed. It also allows broadcasters to better integrate video from a remote production facility, according to Mr. Moschopoulos.
Chief executive Romolo Magarelli said the company has a heavy focus on research and development, with a goal of developing products that help its customers deliver video content between platforms quickly and as cheap as possible. "The reality is, video is being consumed more and more. If you look at the amount of video being moved over IP networks … it's off the charts," he said. "A good portion of that … is professional video and that's where we fall."
BMO's Mr. Moschopoulos believes Evertz has "competitive traction" with its newer products and "one of the best engineering teams I've seen as far as the breadth of the product portfolio and pace of new product production."
He is one of three analysts with a "buy" or equivalent recommendation on the stock, while two have a "hold," according to S&P Capital IQ.
RBC Dominion Securities analyst Steve Arthur has an "outperform" on the stock, citing the company's "healthy balance sheet" and its dividend, which yields about 4 per cent.
"Evertz remains a technological leader and in our view should outpace industry growth as it enters adjacent markets and capitalizes on past R&D investments," Mr. Arthur said in a recent note, in which he raised his price target to $20.
The analyst consensus price target for Evertz over the next year is $18.14, according to S&P Capital IQ.
The stock hit a three-year high of $18 on the Toronto Stock Exchange in early March, after the company said revenues rose 30 per cent in its third-quarter quarter ended Jan. 31, beating expectations. That followed a drop in revenues for the first two quarters of its fiscal year.
The stock has sold off since early March, which some attribute to a broader selloff among technology stocks. Evertz is also considered volatile because the stock is thinly traded. Management of the company owns about 70 per cent of the shares.
Some analysts believe Evertz is fairly valued at its current price. "This is a very well-run company in a tough market," said Canaccord Genuity analyst Robert Young, who has a "hold" on the stock and a $17.50 target.
"It has perennially done better than its peers and has very strong execution, but I'd say, given the growth outlook for the market and the company, where the stock trades I think is fair."