Avigilon (AIOCF): In the rapidly growing surveillance sector

Avigilon

This stock also trades on the Toronto exchange (AVO.TO)

Avigilon Corp., headquartered in Vancouver, British Columbia, is a leading designer, manufacturer and marketer of network-connected video surveillance systems, surveillance cameras and video analytics (software that scrutinizes video input). Customers include police departments, schools, hospitals, prisons, airports and public transportation systems.

The company’s research goal is to upgrade surveillance cameras to high-definition quality, enabling customers, including retailers and governments, to protect against theft or terrorism by providing detailed images usable in court or usable by facial recognition software. The company’s cameras can identify faces and license plates from 46 meters (150 feet) away.

Avigilon’s sales have been strong during the past five years, but earnings have been lagging. Now, with a “stronger focus” on increasing profitability, the company’s earnings will likely grow at a much livelier pace.

Avigilon boasts a strong balance sheet with modest debt and strong cash flow. The current 15.0 P/E (price to earnings ratio), based on 2016 EPS, is easily justified by Avigilon’s growth prospects. Earnings per share will likely grow at a 14% pace during the next five years. Avigilon is experiencing the typical growing pains that most small companies have to endure—high marketing expenses and high research and development costs—but the expenditures will lead to rapid growth in future years.

Avigilon was originally recommended by Roy Ward of Cabot Benjamin Graham Value Investor. Notably, Roy wrote, “The current price offers an excellent entry point to buy an exciting company in the rapidly growing surveillance sector. I expect Avigilon’s shares to double within two years.”

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