Scotiabank has initiated coverage of Alithya Group Inc. (TSX:ALYA) (NASDAQ:ALYA), assigning a Sector Outperform rating and setting a price objective of C$3.00. The technology consulting company is trading at $1.21, and InvestingPro data referenced alongside the coverage indicates the stock appears slightly undervalued relative to fair value estimates.
The bank emphasized the strength of Alithya’s organic revenue expansion in the United States. Scotiabank notes U.S. operations are increasing at double-digit rates and now make up half of the company’s revenue mix. That performance is consistent with Alithya’s broader revenue trajectory, which shows 3.4% growth over the last twelve months and a five-year compound annual growth rate of 11%.
On valuation, Scotiabank’s C$3.00 target equates to roughly a 5.0x EV/EBITDA multiple on a CY2027E basis. The bank contrasts that multiple with the multiple used to value peer CGI and applies approximately a 50% discount, citing Alithya’s much smaller market capitalisation of $120.69 million and its lower trading liquidity. As a point of reference, Alithya’s current enterprise value to EBITDA multiple stands at 6.95x.
Scotiabank expects Alithya’s U.S. momentum to continue, driven in part by deployments of enterprise resource planning and enterprise performance management solutions from major software vendors Microsoft Corporation and Oracle Corporation. The bank’s coverage highlights those vendor-led deployments as key demand drivers for the company’s North American business.
The coverage is authored by Scotiabank analyst Kevin Krishnaratne, who now lists the stock under his remit. Krishnaratne characterises the present share price as offering an attractive entry point for investors. The note also points out that Alithya was not profitable over the last twelve months. Separately, InvestingPro data included with the coverage shows analysts expect Alithya to report positive earnings of $0.25 per share for the current fiscal year. The company’s next scheduled earnings release is on February 13.
Context and implications
- Initiation of coverage by a large Canadian bank with an outperform rating provides a formal analyst baseline for institutional and retail investors evaluating Alithya’s stock.
- Valuation on a forward CY2027E EV/EBITDA basis incorporates a meaningful discount to a larger peer, reflecting market perceptions tied to market cap and liquidity rather than underlying EV/EBITDA at present.