Badger Daylighting (BDGI.TO)

North American spending on utility upgrades, water systems, and underground infrastructure has been strong, which has helped boost BDGIs fundamentals. It has seen strong earnings momentum amid better operating leverage and this has helped to fuel margin expansion for the company. It trades at a 21.5X forward earnings mutliple, forward sales and earnings growth estimates are trending higher, and growth rates are strong. We feel that its rise in share price has been backed by fundamentals, and we feel that if spending on infrastructure continues at a similar rate, that this move is well-supported by fundamentals and real growth prospects. We would be comfortable with a position here, while acknowledging it could consolidate as some investors look to lock in profits.
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BDGI has seen strong momentum recently, up 70% year-to-date, and 60% over the past year. Forward sales growth is decent, in the high single-digit range, but earnings growth is expected to be low double digits, highlighting solid margin expansion. Its growth rates can be volatile and cyclical, but profit margins have mostly been rising, and it generates decent free cash flows. It trades at a decent valuation of 18X forward earnings. The recent move has been strong, and we think investors will want to see strong earnings to reflect its share price growth. We would not be surprised by some consolidation at some point, but for a long-term hold, we would be fine initiating a position here.
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Are the biggest in North America and boast a top management team. Business is doing very well. Will be margin expansion. They are not overbuilding. 8% of business is from data centres. 10% is from Canada, but will accelerate if the Build Canada bill goes ahead. Still trades at an attractive PE.

In an excellent position. Most operations are in US. Business is really booming. US election gave management clarity on how to allocate capital. Despite tariff concerns, what they're making is long-term, critical investments. If it stays cheap, possible takeout by private equity or a strategic acquisition.

Stands to benefit from clarity about where to allocate spending after the US election. Will benefit from US spending on infrastructure and energy. Biggest hydrovac excavation company in NA. Big pickup right after US election, expects a new high on revenue this cycle, as well as on margin profile. Also buying back stock. 

Very attractive valuation multiple. Prime takeout candidate if it stays at these levels. Yield is 1.9%.

Downtrend since earlier this year, along with energy stocks in general. Over the next month and a half, energy is historically weak or sideways. January-April is a time of really positive seasonality. 

Price momentum started to improve. RSI started to tick up. Started to see institutional buying. Short-term price trend started to pick up. All of this tells him that the bigger downtrend is reversing, and now seeing signs of new uptrend. Next target is around $46, roughly 10% upside from here. Likes it here, attractive long-term entry point.

Large business across North American.
Good play on infrastructure investment throughout North America.
Does not own shares at this time.
Prefers other names in sector.
Prefers other names with electrification exposure.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Guided double US revenue over next 3 years. Helped favourably by US storms. Missed three of past eight quarters. Unlock Premium - Try 5i Free

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Would be fine to move on from this. The balance sheet and cash flow have weakened. Could buy WSP as an alternative. Unlock Premium - Try 5i Free

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The company has been on a downward trend recently. It is based on stock technical factors. It missed last quarter which could be why there is some nervousness. 5i would be okay holding. Unlock Premium - Try 5i Free

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The company missed on sales by 2% by $558M. All metrics fell YOY. Although covid had an impact, the miss was much worse than expected. 2021 still calls for robust growth. Unlock Premium - Try 5i Free

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Any energy recovery would be good for the company. The infrastructure spending will also be a catalyst. Debt has declined and EPS is expected to rise more than 65%. Unlock Premium - Try 5i Free

He owned it for 5 minutes last spring. They had a great business plan, making money and were well-financed. But this year blew that out of the water. Things changed so fast because of Covid. This shot up so quickly that he sold it. Russel Metals has better value now.