Lumine Group is undervalued, RBC says

RBC analyst Paul Treiber thinks there is money to be made on Lumine Group (Lumine Group Stock Quote, Chart, News, Analysts, Financials TSXV:LMN).

As reported by The Globe and Mail, Treiber March 28 initiated coverage of Lumine with an “Outperform” rating and 12-month price target of $50.00.

“Since Lumine was effectively founded in 2014, the company has created significant shareholder value,” the analyst wrote. “Revenue has expanded from zero to $668-million last year, with a 62-per-cent CAGR [compound annual growth rate] between FY22 and FY24, through acquisitions funded primarily through FCF. Lumine has averaged 31-per-cent adj. EBITDA margins and 35-per-cent ROIC over the last 3 years, which affirms the company is deploying capital at least in the high teens/ low 20-per-cent range, above most other consolidators in our coverage. We believe Lumine will compound capital at a high rates of return, given insider ownership (Constellation, directors and key managers hold 68 per cent of shares) and shareholder-aligned performance incentives. Lumine, at just 1.1 per cent of its addressable market, has a long runway for growth.”

Treiber says the stock is attractive at current levels.

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““Lumine has a proven business model, acquiring and managing vertical market software (VMS) companies,” he said. “Due to Lumine’s relatively small size and focus on large acquisitions, we believe that Lumine will experience rapid growth through acquisitions over the next several years. We believe Lumine’s valuation is attractive, given expected value creation through compounding of capital as Lumine re-deploys excess FCF into accretive acquisitions,” he added.