For years, I dithered over whether to buy shares in Korvest Ltd (ASX: KOV), but broker Euroz Hartleys is urging you not to make the same mistake.
Looking back, the main reason I didn't buy in was that I thought the company was fully priced.
How long can a company continue to deliver double-digit returns, I thought. It turns out, they can do it for quite a long time.
According to data I sourced from my broker on Thursday, the company has delivered total shareholder returns of 23.9% over 10 years and 51.5% over the past year. Not too shabby at all.
So, back to my original qualms – surely this means the shares might be near the top of their range?
According to a new research report from Euroz Hartleys, that's not the case.
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Well-placed industrial supplier
Taking a step back, what does Korvest do? In short, they provide galvanising services, as well as supplying cable and pipe supports to major infrastructure projects through their EzyStrut division.
So they're fairly well aligned to growth in industrial projects, and as Euroz Hartleys analyst Oliver Porter points out, the growth in data centres, renewable energy projects, and infrastructure in general also works in their favour.
To feed this demand, the company is embarking on its first major facility upgrade in "decades", Mr Porter's report says, which is scheduled for completion in late calendar year 2026.
He goes on to say:
The project will increase manufacturing footprint by approximately 80%, positioning Korvest to capture additional market share and support future growth. Alongside the expansion, a series of operational optimisation initiatives are underway, aimed at driving margin improvement over time.
Mr Porter says the company is currently trading at around 12 times forward earnings, which he sees as a discount.
At about 12x FY27 price to earnings, investors are gaining exposure to a well-capitalised, high-yield, market-leading infrastructure supplier – trading on a multiple that implies limited growth potential despite a clear pathway for earnings growth.
The company's balance sheet was also solid, with the company holding $13 million in cash and no debt.
Euroz Hartleys has initiated coverage on Korvest with a buy recommendation, with the following reasons put forward to have confidence in the Adelaide-based company.
We expect Korvest to continue compounding growth steadily through our forecast as they service increasing demand and pursue additional market share upon completion of their facility expansion in the short term. Major project awards provide upgrade potential to our base case estimates.
How much are the shares worth?
So what value does Euroz Hartleys put on the stock? Mr Porter has calculated a price target of $14.60 for Korvest shares compared with the current price of $13.19, implying a return of 10.7% should they hit this level.
However, the company also pays dividends, with the broker forecasting a dividend yield of 5.2% this financial year and 5.4% next year.
I'm certainly still holding given the tailwinds this modestly-sized company has, and a bit of new broker interest surely can't hurt either.
