Savaria (TSX: SIS) Design, produces, distributes and installs accessibility equipment, offering solutions to people with physical challenges worldwide. It also produces and marks pressure management products, medical beds and medical equipment and solutions that help to guarantee the safe movement of patients.
Together with the production facilities in Canada, Europe, the United States, China and Mexico, Savaria uses a global dealer network and direct sales offices in Canada, the United States, seven European countries and Australia to market its products worldwide.
After delivering an impressive return of 35% last year, the company left the broader stock markets this year, with a return of 6.5%. Let us assess the recently reported performance of the second quarter and the growth prospects to evaluate potential buying options in the shares.
Savaria’s second quarter performance
Savaria reported a turnover of $ 226.7 million in the second quarter, which represents an increase of 2.4% compared to the same quarter in the previous year. Together with a favorable currency translation, the contribution of the acquisition of Western Elift helped to overcome a 0.7% sales contraction during the quarter, which stimulates the turnover. Furthermore, the gross wests rose by 6.6%, while the gross margins extended to 39%by 150 basic points. The focus on achieving efficiency in purchasing, prices and operations via the “Savaria One” initiative has led to an extension of his margins.
Supported by topline growth and an expansion of the gross margin, the company reported a business income of $ 26.7 million, which represents an increase of 18.2% on an annual basis. In the meantime, the operational margin expanded with 160 basic points to 11.8%. In addition, the adapted EBITDA of the company (profit before interest, taxes, depreciation and amortization) grew by 20.6% to $ 46.7 million, with the adapted EBITDA margin that was improved to 20.6% by 160 basic points.
The company’s net result was $ 16.32 million. The removal of special or one-off items, however, was $ 20.83 million or $ 0.29/share, which represents an increase of 26.1% compared to the quarter of the previous year. Moreover, the company has strengthened its financial position by reducing its net debt to adapted EBITDA ratio from 1.63 at the end of last year to 1.34. Now let’s look at the growth prospects.
Savaria’s growth prospects
The world’s population is aging, stimulating the demand for accessibility solutions. Given the extensive product lines, Savaria is well equipped to take advantage of the addressable market expansion. The company is working on product innovation, stimulation capacity, strengthening efficiency and achieving cost reductions due to streamlining purchasing. At the end of the second quarter, the company had $ 275 million in available funds, which allowed it to invest in marketing initiatives and strategic acquisitions.
Furthermore, the management of the company has initiated the second phase of the ‘Savaria One’ initiative, which will outline its strategy for the next three years. In addition, the acquisition of the Western Lift in May reinforced the position of the company in the luxury residential lift market of Vancouver. In the midst of these growth initiatives, the management of the company predicts its 2025 turnover around $ 925 million, which represents an increase of 6.6% compared to the previous year. Management also expects the adapted EBITDA margin to improve from 18.6% to 20% this year. Given all these factors, I believe that the growth prospects of Savaria look healthy.
Investors’ pick -up restaurant
On the back of his underperformance this year, Savaria is currently being traded with an attractive appreciation. The NTM (next-12h) price-to-sales and NTM price-to-win multiples are 1,6 and 17.2 respectively. In addition, the company increased its monthly dividend earlier this week to $ 0.0467/share, resulting in a progressive dividend yield of 2.70%. Given all these factors, I believe that Savaria offers an excellent buying option at these levels.
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