AcuityAds Holdings Inc (TSX: AT) is a technology company that enables marketers to connect intelligently with audiences across video, mobile, social and online display advertising campaigns. Its solutions include Illumin, which is its marketing platform; Attention Advertising; and Audience Solutions.

Why Should Investors Book Profit? 

• Flat cash flows from operations: Despite clocking higher net income in FY 2021, on the back of robust revenues, the company’s cash flows from operations remain flat at CAD 19.7 million compared to CAD 19.4 million in FY 2020.

• Higher average collection period: In FY 2021, the company is having a higher average Accounts Receivable day of 94.3 days, against the industry median of 48.8 days. A higher average collection period indicates that the organization is collecting its payments at a slower pace. This may create a difficulty for the company to have enough cash on hand to meet their financial obligations.

• Stretched valuations: AT shares are available at an NTM PE multiple of 27.0x compared to the industry (Media & Publishing) median of 10.9x and on NTM Price/ Cash Flow multiple its trading at 15.0x against a respected industry median of 9.3x. This implies that the shares are overvalued against the industry. The stock is overvalued on many valuation multiples. Higher valuations against an industry draws a caution line.

Valuation Methodology (Illustrative): EV to Sales

Analysis by Kalkine Group 

Stock recommendation

The company reported outstanding FY 2021 results, where it recorded tremendous growth in its topline and bottom line, however the growth in its cash from operations remained at a flat side. Additionally, its average A/R days are on the higher side when compared to the industry median, which may make it harder for the company to meet its financial responsibilities. Along these lines, the AT stock is trading at stretched valuations across various criteria.

Hence, based on the above rationales and valuation, we recommend a “Sell” rating on the stock at the last closing price of CAD 4.18 on April 19, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on April 19, 2022). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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