Foster Stockbroking initiates coverage of Adacel, points to 18% price upside
Foster Stockbroking has initiated coverage of Adacel Technologies Limited (ASX: ADA) with a buy recommendation and a 12-month price target of $2.79, a premium of 18% to Thursday’s closing price of $2.37.
Adacel is a major global provider of air-traffic management and control training simulation systems.
The company boasts a blue-chip client base in a niche market with 341 simulators across 38 countries.
Its clients include major airlines as well as defence organisations such as the US Air Force and the US Army. The company’s largest customer in fiscal 2016 was Lockheed Martin.
Foster Stockbroking expects increasing sales and earnings, a broadening of its customer base and retention, and enhancement of existing contracts to all act as significant share price catalysts over the coming year.
The broker is forecasting net profit to increase from $7.6 million in fiscal 2016 to $8.2 million in fiscal 2017.
However, Bell Potter is more bullish with its expectations. The broker is forecasting a net profit of $10.8 million in fiscal 2017, and it has a share price target of $3.50 on the stock.
When Bell Potter ran the ruler across the stock last November it projected strong double-digit earnings per share growth over the next three years. Based on its forecasts, earnings per share growth of 17%, 18% and 13% are expected in fiscal year’s 2017, 2018 and 2019 respectively.
It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.