Tuesday, Maxim Group initiated coverage on Iteris , Inc. (NASDAQ:ITI) with a Buy rating and set a price target of $11.00.
The firm highlighted Iteris' role in enhancing transportation safety, efficiency, and environmental sustainability through its hardware, software, and services. The company's technology solutions and success in securing major contracts were noted as positive factors. Additionally, the large Total Addressable Market (TAM) and government infrastructure spending were seen as beneficial for the company's growth.
Iteris is expected to have its best year in fiscal year 2024 (ending in March), recovering from previous supply chain and labor issues faced in fiscal year 2023. This improvement is anticipated to be driven by high-margin, recurring revenue software. The management team expressed optimism, setting a target for a revenue compound annual growth rate (CAGR) of 14%-16% and an adjusted EBITDA margin increase to 16%-19% by fiscal year 2027, compared to 7%-9% in the estimated fiscal year 2024.
The company concluded the year 2023 with a solid financial position, boasting $21.2 million in unrestricted cash and no outstanding debt. Forecasts indicate that Iteris will maintain positive free cash flow (FCF) throughout fiscal year 2027. When compared to its peers, Iteris trades at an enterprise value to estimated calendar year 2025 adjusted EBITDA multiple of 9.5x, which is significantly lower than the peer group median of 26.9x.
The $11 price target set by Maxim Group is based on a multiple of 25.0x the firm's estimated calendar year 2025 adjusted EBITDA. This target reflects the firm's confidence in Iteris' future financial performance and market valuation.
InvestingPro Insights
Iteris, Inc. (NASDAQ:ITI) shows promising signs for potential investors according to recent insights from InvestingPro. With a market capitalization of $194.54 million and a robust revenue growth of 16.12% in the last twelve months as of Q3 2024, the company's financial health appears to be on a positive trajectory. This is further supported by a gross profit margin of 36.17%, indicating efficient operations and a strong ability to retain earnings.
InvestingPro Tips suggest that Iteris holds more cash than debt on its balance sheet, a sign of financial stability, and analysts predict the company will be profitable this year. Additionally, the company's net income is expected to grow, aligning with the optimism expressed by the management team. While some analysts have revised their earnings downwards for the upcoming period, the company's low P/E ratio relative to near-term earnings growth indicates that the stock may be undervalued.
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