Opinions
The Panic-Proof Portfolio (Stockchase Research)
Black Diamond Group
BDI-T
TOP PICK
Apr 23, 2024
Stock price when the opinion was issued
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EPS of $0.08 missed expectations of $0.086 and revenues of $91.1M beat estimates of $83.64M. This is the second consecutive quarter of disappointing results, and while it trades at a reasonable valuation of 13.3X forward earnings, its high and growing debt levels are a concern. Its valuation has been lower in the past, and so there is room for multiple contraction here. Given its high debt load and long-term declining earnings, we would feel comfortable taking some gains off the table here. With debt levels creeping higher, we feel this can begin to erode its profits and cash flow.
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BDI is a Calgary based modular building rental and lease company operating primarily in North America and Australia. It has seen revenues grow over 20% and profit grow over 30% this past year. Strong cashflow allowed the repayment of $20 million and $49 million in new organic growth. It trades at under 2x book and 21x earnings. We recommend placing a stop-loss at $7.50, looking to achieve $11 -- upside potential of 22%. Yield 0.9%
(Analysts’ price target is $10.75)We again reitereate BDI, the builder of modular accommodation used in disaster recovery and turn-key camps as a TOP PICK. We like that cash reserves are growing, while debt is retired and shares bought back. It trades under 2x book and 22x earnings. We continue to recommend a stop at $7.50, looking to achieve $11.50 -- upside potential of 24%. Yield 1.3%
(Analysts’ price target is $11.63)We reiterate this seller and renter of modular workforce units as a TOP PICK. Bookings and revenues in rentals are up over 15%. Quarterly cash reserves are growing, while debt is retired and shares bought back. It trades at 20x earnings and under 2x book. We recommend trailing up the stop (from $7.50) to $8.50, looking to achieve $12.00 -- upside potential of 20%. Yield 1.2%
(Analysts’ price target is $12.17)We reiterate this developer of modular structures as a TOP PICK. Analysts like the resilience the company has demonstrated over the past few challenging quarters. We look to the ramp up in infrastructure projects in its markets as a indicator of future earnings growth potential. We like that cash reserves have been growing, while the company retires debt. It trades at 24x earnings and under 2x book value. We recommend maintaining the stop at $8.50, looking to achieve $12.50 --upside potential of 30%. Yield 1.2%
(Analysts’ price target is $12.54)Our PAST TOP PICK with BDI has triggered its stop at $8.50. To remain disciplined, we recommend covering the position at this time. This will result in a net investment loss of 8%, when combined with our previous guidance.
EPS of 9c crushed estimate of 6.3c; Revenue of $102.2M beat estimates of $84.9M. EBITDA of $26.5M beat estimates by 13%. Revenue rose a robust 39%, EBITDA rose 37%. Commentary was good, with the company focused on both organic growth and acquisitions, and it continues to buyback stock. Debt is still on the high side but these results were solid. The stock is down 14% this year, but we think these results should get it a bit of attention. As a small, cyclical company there remains risks here, and it is more expensive at 15X earnings than many others. But we would see it as a reasonable, though higher risk, buy for small cap investors only.
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After reporting earnings beating expectations, we reiterate this modular building rental and lease company as a TOP PICK. We like that quarterly cash reserves are growing, while debt is retired. It trades at 19x earnings and under 2x book value. Analysts like that earnings were 7% higher than expectations and that capital appears to be deployed in projects that are accretive to earnings. We continue to recommend a stop at $7.50, looking to achieve $12.00 -- upside potential of 29%. Yield 1.3%
(Analysts’ price target is $12.01)