Savaria (TSX:SIS) offers a wide portfolio of accessibility products to elderly and physically challenged people. It has manufacturing facilities worldwide, with four in Canada, five in Europe, two in the United States, two in China, and one in Mexico. The company sells its products worldwide through 1,500 dealers and 28 company-owned direct sales offices.
The company has been under pressure over the last two trading days, losing 10% of its stock value. Despite the correction, the company’s stock price is up 39% this year amid solid performances and healthy growth prospects. Let’s assess whether the recent pullback offers an excellent buying opportunity for long-term investors by looking at its performance this year and growth prospects.
Savaria’s year-to-date performance
Savaria has posted a revenue of $644.4 million in the first three quarters, representing a 3.9% increase from the previous year amid growth across its accessibility and patient care segments. The revenue from its accessibility segment grew 5% amid 6.1% organic growth and 1.3% favourable currency translation. Meanwhile, divesting its vehicle operations in Norway offset 2.4% of its topline growth. Its patient care segment witnessed just 0.3% growth amid 0.8% favourable currency translation, partially offset by a 0.5% decline in organic growth.
Meanwhile, the company generated an operating income of $62.4 million during the quarter, representing a 19.2% increase from the previous year. Its operating margin expanded from 8.4% to 9.7%. Amid the top-line growth and expansion of its operating margin, the company’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew 23.6% to $118.4 million. The company also witnessed its adjusted EBITDA margin to expand from 15.3% to 18.4%.
During the period, Savaria generated $85.9 million of cash from its operations, which it utilized to make capital investments and acquisitions and pay interest and dividends. Moreover, the company strengthened its financial position by lowering its net debt-to-adjusted EBITDA multiple to 1.69 compared to 2.09 at the beginning of this year. Now, let’s look at its growth prospects.
Savaria’s growth prospects
Amid the aging population and rising income levels, the demand for accessibility solutions is rising. Given its comprehensive product lines across accessibility and patient care segments, the company is well-positioned to benefit from the expanding addressable market. The company has adopted a multi-year “Savaria One” initiative, focusing on new product development, increasing its market share, capacity, and throughput, and improving supply chain efficiency.
Further, the company is evaluating acquisition opportunities that could replace the revenue decline due to the divestment of its Norwegian vehicle adaptation business. With these growth initiatives, Savaria’s management projects its 2025 revenue to be around $1 billion, while its adjusted EBITDA margin could improve to 20%. Considering all these factors, its growth prospects look healthy.
Valuation and dividend
Amid the recent pullback, Savaria’s NTM (next 12 months) price-to-sales and price-to-earnings multiples have declined to 1.6 and 18.4, respectively. Moreover, the company rewards its shareholders with monthly dividends. It currently pays a monthly dividend of $0.045/share, translating into a forward dividend yield of 2.52%.
Considering its healthy growth prospects, attractive valuation, and healthy monthly dividend, I am bullish on Savaria despite its near-term volatility.
