On Monday, National Bank Financial began coverage on TerraVest Industries Inc (TVK:CN), assigning the stock an Outperform rating and setting a price target of C$89.00. The firm highlighted TerraVest's role as a consolidator in niche markets, with a diverse portfolio of over 25 operating businesses.
These businesses are spread across various segments, including HVAC, which represents 32% of their operations, Compressed Gas at 28%, Processing Equipment at 16%, and Service at 24%. TerraVest is recognized as a leading entity in the storage vessels, boilers, wellhead processing, and fluid management markets.
The analyst at National Bank Financial provided insights into the rationale behind the positive outlook, pointing to TerraVest's strategic M&A approach as a key driver of its valuation. The price target is grounded on a 10.75 times multiple of the projected 2025 enterprise value to EBITDA (EV/EBITDA).
This multiple includes a 9.5 times base multiple and an additional 1.25 times premium for M&A growth, which anticipates $300 million in annual acquired sales. These projections are incorporated into the valuation multiple but remain outside of the firm's formal estimates.
The target price implies a free cash flow (FCF) yield for the second fiscal year (FY2), after accounting for leases and interest, of 4.2%. The analyst's long-term discounted cash flow (DCF) model supports the target price, applying an 8.1% discount rate. This approach underscores the firm's confidence in TerraVest's financial strategy and future performance.
The announcement of the Outperform rating and C$89.00 price target is likely to be of interest to investors and market watchers, as it represents a financial institution's perspective on TerraVest's market potential and investment appeal. The coverage initiation by National Bank Financial provides an analytical viewpoint on TerraVest's stock, offering an outlook based on the company's current operations and expected financial trajectory.
InvestingPro Insights
TerraVest Industries Inc (TSND) has been navigating a dynamic market landscape, and recent data from InvestingPro provides a multifaceted view of the company's financial health and market performance. With a market capitalization of approximately $476.33 million USD and a striking revenue growth of 22.31% over the last twelve months as of Q1 2024, TerraVest's ability to expand its revenue streams is evident. This growth is underscored by a gross profit margin of 50.08%, reflecting a robust ability to manage costs relative to its revenue.
InvestingPro Tips indicate that analysts are optimistic about TerraVest's trajectory, expecting net income to grow this year and forecasting sales growth in the current year. These projections align with the positive sentiment expressed by National Bank Financial's Outperform rating and ambitious price target. Additionally, while analysts have revised their earnings downwards for the upcoming period, they predict the company will become profitable within the year, showcasing confidence in TerraVest's strategic direction.
It's worth noting that TerraVest does not pay a dividend to shareholders, which may influence investment strategies, particularly for those seeking regular income streams. Moreover, the company's short-term obligations currently exceed its liquid assets, highlighting a potential area for financial strategy refinement.
Investors seeking a deeper analysis of TerraVest Industries Inc can find further InvestingPro Tips, with a total of 8 tips available, by visiting https://www.investing.com/pro/TSND. For those interested in a comprehensive investment tool, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking a wealth of data and insights to inform investment decisions.
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