Analyst Explains Why They Upgraded Their Rating on Magellan Aerospace (MAL)

By Jason Carr

Yesterday, an analyst has provided a rating update for the Consumer Goods sector company, Magellan Aerospace (TSX: MAL). The company received a Buy rating from Canaccord Genuity’s analyst Doug Taylor, with a C$20 price target.

Taylor wrote:

“Magellan reported Q2 results last week that would have been just shy of expectations if not for a currency gain. On the back of the results and in light of the 26% YTD decline in Magellan shares, we are upgrading our recommendation to BUY (from HOLD). Most of Magellan’s end-markets are growing which we see as offsetting the pressure on margins induced by its large OEM customers and recent currency movements. At 5.4x NTM EBITDA and 10.1x P/E, we think investors are compensated well for risks. There remains upside to our valuation if the company can effectively utilize its underlevered balance sheet to add complementary assets which is not reflected in our model. Our target is C$20 (from C$21), representing 29% upside to Friday’s close including the 2% dividend yield.”

Taylor has an average return of 10.8% when recommending Magellan Aerospace.

According to TipRanks.com, Taylor is ranked #1320 out of 4848 analysts.

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Currently, the analyst consensus on Magellan Aerospace is a Moderate Buy with an average price target of C$22, which is a 41.9% upside from current levels. In a report issued on August 1, TD Securities also reiterated a Buy rating on the stock with a C$24 price target.

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Magellan Aerospace’s market cap is currently C$902.2M and has a P/E ratio of 9.8. The company has a Price to Book ratio of 1.21.

Magellan Aerospace Corp. engages in the provision of complex assemblies and systems solutions to aircraft and engine manufacturers, and defense and space agencies. Its products include aeroengines, aerostructures, wire strike protection system, rockets, space, sand castings, power generation, and supporting materials.

The company’s shares closed on Friday at C$15.50, close to its 52-week low of C$15.02.