NFI Group (TSX:NFI) tanked early this week after announcements the company’s supply-chain issues would put a damper on annual revenue. In fact, the company stated these “disruptions” from the COVID-19 pandemic would shrink not just this year’s financial targets, but even the first half of 2022.
The news sent shares of NFI stock down 20% on Monday, where it continued to fall. However, analysts believe this short-term situation provides a strong jump-in point for long-term, patient investors.
What you should know
The Manitoba bus manufacturer has made a massive shift in the last while. It now looks to create electric-powered buses, creating an entirely new method of creating revenue as the world looks to shift to clean energy. NFI stock has deals within Canada and outside across the globe. And that’s why it remains confident it can reach its medium-term target of between $400 and $450 million in EBITDA by 2025.
The main problem today is the pandemic. This has put a huge stall on production, of course. Yet NFI stock remains the top-choice for electric-powered buses now and in the years to come. So even with the cuts, analysts believe the company will continue to be a solid long-term hold. In fact, analysts believe it will continue to outperform the industry in this regard.
So really, investors should look at the current situation as expected. A downgrade given the global situation of the pandemic should come as no surprise. But it also means this is a temporary situation that investors will not have to count on for future growth. Once the supply chain issues are solved outside the pandemic, NFI stock will be back on track to solid long-term growth.
Strong valuations
While valuations aren’t everything, this coupled with long-term potential for growth is what investors should focus on. The company currently boasts a price-to-sales (P/S) ratio of 0.68, a price-to-book (P/B) ratio of 2.09, and an EV/EBITDA of 37.46. And while shares are down 20% in the last month, shares of NFI stock are still up 40% in the last year.
Even better, long-term growth has been quite strong. Shares of NFI stock are up 501% over the last decade and were up 1,181% before the pandemic struck. So the company is still well away from reaching those all-time highs that came before the crash. Even still, today’s situation still accounts for a compound annual growth rate (CAGR) of 19% as of writing. On top of that, investors can still look forward to a dividend yield of 2.85% as of writing.
Bottom line
If you’re looking to get in on the electric vehicle industry for a cheap price, it’s a great time to consider NFI stock. But once you buy this stock, be aware that there will be volatility in the near future. Yet I would think two years from now, this stock is very likely to start climbing towards the heights seen back in 2019 before the market crash and pandemic.
The current downfall can pretty much entirely be blamed on the pandemic. So once the pandemic is over, investors can look forward to solid growth once more.
