Avigilon Corp (AVO.TO)

Chart shows a downward trend from the beginning of 2014. There was consolidation back in late 2014 which didn’t last. Went back into its downtrend. It failed to find support over the past 2 years. That would worry him. He would want to see the current short term downtrend broken.

They continue to have great top line numbers, but the bottom line is really the issue. Until you see a couple of quarters where they really generate nice profit, the street is probably going to have them in the penalty box. If you own, he would probably continue to hold. It doesn’t have increased valuation. Eventually the company probably gets bought out. They have a target of $500 million revenue a year out from now, and he feels they have a pretty good chance of hitting that.

A former stock market darling that now can only do wrong. They have a revolving door in the executive suite. The multiple will keep dropping.

Defined downtrend and no sign of basing. It is trying to test the trend line, but there is no sign of an upswing in trend.

The stock is down 60% since Jan 2014. Despite the controversy, this company is making money. For a tech company to have a 5.6% free cash flow yield, it is a big deal. 9.2% ROA, which is an A+ category. $95 million worth of cash. On a trailing basis of 15X PE against 25% earnings growth gives you a 6% PEG. In 2016, earnings are forecasted to grow 42% giving a 12.6X PE and a PE to growth of .3 times.

It may be a value trap here. He is not surprised to see it at these levels. At some point you will get to a valuation where you are going to pay for their growth. He doesn’t think their heightened risk is out of the equation.

In this kind of environment we have a lot of volatility taking place, and investors are not going to tolerate the lack of visibility going forward. The overall trend over 2014-2015 has been down. This is one that he would be staying away from.

He has a small short position. A competitor has said they will discount the products. They reported some iffy earnings numbers. There is also this weird exodus of employees from the company.

He bought it a couple of months ago. They are doing much more integrated systems and analytics. There is great growth in this area and they are dominant. He likes the space and the technology.

Basically in the spy camera/surveillance business. The advantage is that they have extremely high definition cameras as well as a complete integrated network, which is very easy to install. Latest earnings were pretty good, and the upcoming forecast is that earnings growth this year is an 11% decline giving a 21 PE. Looking out to next year there is a forecast of a 39% earnings growth against a 15 PE as well as ROE of about 12% and growing, which is pretty good. The company continues to end up chasing the carrot of sales of $500,000. His one-year view is that you will be a happy investor. Ranks in the top 5% of his database.

A classic scenario of a company doing what they want to do and investors not liking it. They are ramping up expenses because they see great growth opportunities. That of course hurts the short term profitability. Investors are not happy because they issued a lot of stock to fund their program. Revenues are growing very high, and last quarter their per-share earnings grew again. Thinks they have a great market share and he does like the sector. Their compound annual growth rate has been stunning over the past 8 years.

Stock is trying to base. It has a big wide trading range of about $14-$20+. This kind of stock looks like a trader, so if you can buy it at the lows of around $14 it looks like an okay trade up into the $22 range.

Wonderful proprietary technology. Explosive growth. If they hit a speed bump that could be challenging. It is pretty widely owned and followed.

Earnings growth has been there. Thinks there are a lot of red flags around the story. Management has been buying back stock. They are very, very volatile in terms of their quarterly earnings. Feels management has ticked off some of the analysts on the street by missing guidance.

He hasn’t been as positive on this one as a lot of people have. He has always seen some risks. Their business model is on just security cameras. He is a little suspect of their competitive advantage. He didn’t like that they had bought their building, as it is a growth company which shouldn’t be spending their capital that way. They’ve had a couple of poor quarters. He would be very careful of the stock, because of revenue expectations come down, the multiple is going to deflate even more.