Savaria (TSX:SIS) is a Canada-based company that offers a wide range of mobility solutions. The TSX stock has delivered market-beating gains to long-term investors, returning 1,470% in dividend-adjusted gains since March 2013. In this period, the S&P 500 and TSX indices have gained 215% and 125%, respectively.
In the last month, Savaria stock surged 13%, valuing the company at a market cap of $1.1 billion. Despite these outsized gains, Savaria offers investors a tasty dividend yield of 3.1%, making it attractive to income-seeking investors. Let’s see if Savaria stock can continue to outpace the broader markets in 2023.
What does Savaria do?
Similar to most other companies, Savaria has been wrestling with rising freight costs, supply chain disruptions, labor shortages, and price increases in the last two years. Despite these issues, the company has increased revenue from $374.3 million in 2019 to $766.5 million in the last 12 months.
A global leader in the accessibility industry, Savaria provides solutions for the elderly and physically challenged to improve comfort and mobility. Over the years, it has built a comprehensive product line and operates via three primary business segments.
The company designs, manufactures, distributes, and installs accessibility equipment. This equipment includes straight and curved stairs, and vertical and inclined wheelchair lifts, as well as elevators for home and commercial use.
Additionally, Savaria manufactures and sells a selection of pressure management products, medical beds, medical equipment, and solutions that ensure safe movement for patients.
Savaria also modifies and adapts motor vehicles across sizes to be accessible by wheelchairs while building other vehicle adaptation products for individuals with special needs.
Savaria operates a manufacturing network that includes seven plants in Canada, four in Europe, and two each in the United States and China.
Is Savaria stock a buy or hold?
Savaria acquired Handicare two years ago. The home mobility gear maker allowed it to expand geographically as well as gain traction in the stairlift product segment. In preliminary results for 2022, the company reported revenue of $789 million, an increase of 19% year over year. Savaria’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) also rose 20% to $110 million, while operating income is forecast at $64 million, compared to $36 million in 2021.
In 2023, Savaria expects revenue to grow between 8% and 10% and forecasts EBITDA margins at 16%. It is optimistic about organic growth in segments such as Accessibility and Patient Care due to a combination of revenue backlog, strong demand, and cross-selling of products. Further, the integration of Handicare should allow Savaria to benefit from cost synergies and improved profit margins.
What next for Savaria stock?
Savaria expects to end 2025 with annual sales of $1 billion and is well on track to achieve its top-line goal. Currently valued at 1.3 times forward sales, Savaria stock is trading at a reasonable forward price-to-earnings multiple of 20.5 times.
Despite an inflationary environment, analysts expect Savaria to increase adjusted earnings by 51.5% in 2022 and 46.4% in 2023, showcasing its pricing power. Bay Street remains bullish on SIS stock and expects it to surge 25% in the next 12 months.
