Baird has started coverage of FleetMatics Group PLC FLTX with an Outperform rating and $52 target price, saying the "risk/reward as attractive, driven by strong industry growth, a formidable competitive positioning and strong forecast revenue and cash flow growth."
"We believe FLTX represents an attractive blend of both revenue growth and strong cash flow generation, particularly relative to its SaaS peer group," analyst William Power wrote in a note.
Further, the analyst pointed to strong industry growth. The company's target fleet management markets are believed to be less than 20 percent penetrated, with market research forecasting 15 percent annual growth through 2019.
In addition, recently launched software products, along with data analytics, could provide upside in 2017 and beyond.
Power estimates 2016 and 2017 revenue of $344.4 million and $408.2 million, YOY growth rates of 20.9 percent and 18.5 percent. The analyst projects EPS of $1.73 for 2016 and $2.07 for 2017.
On the valuation front, Power noted FleetMatics is currently trading at a 2017E EV/FCF multiple of 17.1x and 19.0x EPS, below historical and SaaS averages, despite strong revenue growth and group-leading free cash flow generation.
"[W]ith mixed sentiment (the stock well off 52-week highs), we believe valuation already incorporates much of the competitive concern and would be buyers on the recent weakness," Power added.
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