Avigilon (AVO.TO): An exception of investment

Avigilon is one of the companies in Canada that offers the highest growth. In fact, the compound annual growth rate since 2008 is over 100%! In the last years, the CAGR is about 75% which is still great.

The company produces security equipments (HD video surveillance, door readers, security control software, etc).

Their HD cameras are way better than competition from what is seen on the website of the company. I know, my brothers, a website could say anything to sell crap. But the exceptional growth in sales must mean something about the quality of the products. 

Recently, Canon has acquired a company named Milestone that produces security systems. By doing so, Canon wants to become a leader of security equipment. So, there's competition in sight. But, there's already competition for Avigilon because Milestone exists since 1998, so we'll see in a couple of years if this support of Milestone by a giant (Canon) will become a real threat. I bet that a couple of years of strong growth are still ahead.

The security market should go from 12.6 billion dollars in 2012 to 23.2 billion dollars in 2016. So, there's a lot of room for growth. Security systems have their place everywhere: stadiums, hospitals, airports, banks, offices, shopping mall, casinos, school campus, transportation (subway, bus), etc.

In 2013, the revenue of Avigilon was 178 million dollars. They plan to reach 500 millions of revenue in 2016 (180% of growth). So, they think that a strong growth will continue for at least the next couple of years. A couple of sentences before, I wrote the same thing. It looks like i'm already brainwashed by the marketing of the company.

Three important managers left the company in the recent months. The last departure caused a major drop in the share price (which is still expensive by PE ratio). That drop caused a lot of insider buying around 20$ (recent price is around 22,50$). In may, at least 5 executives of the company bought AVO shares for a minimum 50 000$. Insiders usually don't lose money, so it's a good sign to buy if you ask me.

And what thinks Jason Donville of that company (once again via Stockchase)?

2014-06-19 (BUY): Dipped down pretty low 3 or 4 weeks ago, and is sorry that he didn’t pick it up at that time. Has liked this company, other than it's valuation, for some time. If it comes back 5%-7%, he will be a buyer.

2013-08-22 (DON'T BUY): Outstanding technology but he thinks on valuation that the stock is rich. He questions if they can sustain the growth rate that they have had and this is why the stock is starting to flatten out.

2013-01-08: (DON'T BUY): When a company is growing like this one, they have to finance and one of the ways is by raising more equity. Growing pains of a great growth company. However, this company does not have a lot of recurring revenue so he has taken a pass on this. Thinks it is getting expensive, but so far he has been wrong.

Some important statistics:

Highest PE ratio last 5 years: 58
Lowest PE ratio last 5 years: 32,5
Actual PE ratio: 35,6
Dividend: none

Sales growth rate last 5 years: 102%
Sales growth between most recent quarter and equivalent quarter one year ago: 74%

PE/Growth ratio: 0,48 (under 1 is considered attractive)

Average ROE last 5 years: 17,2
Actual ROE: 21,4

Donville/Greenblatt ratio (ROE/forward PE ratio): 1 

Disclosure: I've bought some shares on june 27th. With the actual evaluation, I can't build a massive position. But I'd be comfortable with something like 3 or 4% of my portfolio. The recent massive insider buying gives me confidence that it's a good time to buy. Let's see if i'm just being manipulated.