In a Nov. 21 research note, analyst Pavel Molchanov reported that Raymond James initiated coverage on Ameresco Inc. (AMRC:NYSE) with a Strong Buy rating and a $20 per share target price. The stock's current share price is around $16.35.
Molchanov reviewed the key aspects of this large U.S.-based energy service company with a footprint in all 50 states. One is that Ameresco is a "one stop shop for energy efficiency" and the only pure play in the space, affording "investors unique leverage to the efficiency theme."
Two, Ameresco's business lines are diverse as are its customers, which are commercial entities and public and nonprofit institutions, Molchanov highlighted. One service the company provides is implementation of energy efficiency solutions, for which it receives revenue upfront. Other recurring revenue comes from operations and maintenance.
The fact that buildings are projected to be a major component of the energy efficiency trend in the future is significant, Molchanov purported. An estimated 45% of U.S. construction companies plan to have 60%-plus "green building" projects by 2021, up from 32% in 2018. Part of this is cities and states mandating energy efficiency in buildings.
A third revenue source for Ameresco is its expanding portfolio of solar power and landfill gas assets, an area of current growth focus for it. "This in-house capacity buildout requires more capital deployment, but the result is a more predictable and higher-margin revenue mix," Molchanov noted.
Ameresco's future revenue growth and EBITDA look good, with growth expected to be mainly organic with a small portion resulting from mergers and acquisitions. In 2020 and 2021, the company should achieve attain an EBITDA increase of 10% and organic revenue growth of 7%, according to Raymond James. Both metrics increased since 2014 at a compound annual growth rate of 8% and 19%, respectively.
Molchanov concluded, "While Ameresco's strategy heightens the level of capital intensity, the story's appealing and differentiated aspects lead us to initiate coverage."
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Disclosures from Raymond James, Ameresco Inc., November 21, 2019
ANALYST INFORMATION
Analysts Holdings and Compensation: Equity analysts and their staffs at Raymond James are compensated based on a salary and bonus system. Several factors enter into the bonus determination, including quality and performance of research product, the analyst's success in rating stocks versus an industry index, and support effectiveness to trading and the retail and institutional sales forces. Other factors may include but are not limited to: overall ratings from internal (other than investment banking) or external parties and the general productivity and revenue generated in covered stocks.
The analyst Pavel Molchanov, primarily responsible for the preparation of this research report, attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers and (2) that no part of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views in this research report. In addition, said analyst(s) has not received compensation from any subject company in the last 12 months.
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