American Vanguard Is A Niche Player In Ag Chemicals

ROTH Capital’s Joe Reagor initiated coverage on American Vanguard Corp. (NYSE: AVD) with a Buy rating and price target of $19.

A Niche Player

“We believe AVD is a unique niche player in the agricultural chemicals market and that the company is poised for additional growth in the coming quarters,” Reagor mentioned.

The analyst also believes that there could be upside to the estimates, driven by American Vanguard’s exposure to the insecticide market and the increasing concerns regarding the West Nile and Zika viruses.

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American Vanguard has witnessed meaningful share price appreciation in recent months, a significant portion of which Reagor attributed to the company’s Dibrom products focused on mosquito issues.

“Recent concerns over the spread of the West Nile and Zika viruses have created a near-term opportunity for sales growth of this product, in our view, which could drive insecticide sales growth of 5–10 percent just in Dibrom,” according to the ROTH Capital report.

Future Growth

The analyst also expects the company to continue to use bolt-on acquisitions to drive growth, while noting that “American Vanguard has a long history of completing small acquisitions aimed at growing its product portfolio.”

Reagor also believes that R&D could play a crucial role in the company’s future revenue growth.

American Vanguard is expected to continue to develop applications and formulas for its current product portfolio, with the most important R&D success coming from its new SIMPAS system, since it “addresses a market need as precision agriculture becomes a hotter topic for the agriculture sector.”