

With its financings now complete, Echelon Wealth Partners analyst Russell Stanley has refreshed his model assumptions on Emblem Corp. (Emblem Corp. Stock Quote, Chart, News: TSX:EMC) and finds the stock still has plenty of upside.

On November 15, Emblem Corp announce it had completed a bought deal financing that netted the company $28.8-million. The company said the vast majority of the proceeds would be used to fund its new 170,000 square-foot Paris Roads facility.

Stanley says although his estimates for Emblem Corp have been revised downward slightly, they are offset by a higher multiple.

“We last revised our 12-month target price in late August,” the analyst explains. “At that time, the adjusted average EV/C2019E EBITDA multiple for the peer group was approximately 7.0x. The peer group multiple has since climbed 80% to 12.6x. On that basis, we are increasing the multiple we use to value EMC from 8.5x to 12x, based on our EBITDA estimate for 2019 (EMC has a December 31 FYE).

In a research update to clients Tuesday, Stanley maintained his “Speculative Buy” rating and one-year price target of $2.25 on Emblem Corp., implying a return of 40 per cent at the time of publication.

Stanley thinks Emblem will generate Adjusted EBITDA of negative $6.9-million on revenue of $2.7-million in fiscal 2017. He expects those numbers will improve to EBITDA of negative $4.5-million on a topline of $10.9-million the following year.

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