Why Badger Daylighting Ltd. Soared 14.8% on Monday

Badger Daylighting Ltd. (TSX:BAD) watched its stock jump 14.8% on Monday following its Q2 earnings release. Should you buy now? Let’s find out.

| More on:

Badger Daylighting Ltd. (TSX:BAD), North America’s leading provider of non-destructive hydrovac excavation services, released its second-quarter earnings results and announced a dividend increase before the market opened on Monday, and its stock responded by soaring 14.8% in the day’s trading session. The stock still sits more than 16% below its 52-week high of $36.22 reached back in April, so let’s take a closer look at the quarterly results, the dividend increase, and the company’s outlook going forward to determine if we should consider initiating long-term positions today.

A very strong quarter of double-digit growth

Here’s a quick breakdown of 10 of the most notable financial statistics from Badger’s three-month period ended on June 30, 2017, compared with the same period in 2016:

Metric Q2 2017 Q2 2016 Change
Hydrovac service revenue $113.46 million $83.74 million 35.5%
Other service revenue $9.61 million $8.02 million 19.9%
Truck placement revenue $282,000 $223,000 26.5%
Total revenue $123.35 million $91.98 million 34.1%
Adjusted EBITDA $32.10 million $23.22 million 38.2%
Adjusted EBITDA margin 26% 25.2% 80 basis points
Net profit $14.72 million $5.95 million 147.3%
Net profit per share (EPS) $0.40 $0.16 150%
Revenue per truck per month – quarterly average $29,141 $23,038 26.5%
Cash flow from operating activities before changes in working capital adjustments $31.67 million $23.14 million 36.9%

Dividend hike? Yes, please!

In the press release, Badger announced a 15.2% increase to its monthly dividend to $0.038 per share, and this increase is effective for its August dividend, which is payable in September.

Badger’s outlook on the rest of the year and 2018

Badger also provided positive outlook on the rest of 2017 and 2018. Here’s an important quote from the press release:

“Badger anticipates that this positive momentum from the second quarter will continue into the second half of 2017. The overall macro-economic environment in both Canada and the U.S. appear to be supportive of ongoing infrastructure, construction, and oil and gas activity levels for the second half of 2017 and into 2018. In addition to increased levels of activity, we continue to see positive momentum as a result of increased customer usage of Hydrovac for non-destructive excavation.”

What should investors do now?

It was an outstanding quarter overall for Badger, and it capped off a very strong first half of the year for the company, in which its revenue increased 25% to $225.16 million, its adjusted EBITDA increased 21.4% to $51.96 million, and its EPS increased 92.3% to $0.50. Its second-quarter results also crushed the consensus estimates of analysts polled by Thomson Reuters, which called for EPS of $0.21 on revenue of $104.75 million.

With its very strong financial performance, its second dividend increase in two years, and its positive outlook on 2017 and 2018 in mind, I think the market responded correctly by sending its stock soaring. I also think it could continue higher from here as investors continue to pile into stocks that will benefit from increased infrastructure spending, and because it still trades at attractive forward valuations, including just 21.6 times fiscal 2018’s estimated EPS of $1.40.

With all of the information provided above in mind, I think Foolish investors should consider initiating positions in Badger Daylighting today with the intention of adding to those positions on any pullback in the near future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned. Badger Daylighting is a recommendation of Stock Advisor Canada.

More on Investing

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

Why Now Is the Time to Invest in Canadian AI Stocks

Are you looking for one of the most solid Canadian AI stocks out there? This one is probably your best…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Why AI Stocks Should Be in Every Canadian Investor’s Portfolio

AI stocks continue to be one of the best options out there for long-term investing, especially when considering Canadian options.

Read more »

stock research, analyze data
Bank Stocks

Canadian Bank Stocks: Buy, Sell, or Hold?

There are opportunities and risks on the horizon for the Canadian banks.

Read more »

Young Boy with Jet Pack Dreams of Flying
Stock Market

Is Air Canada Stock a Good Buy After Its Q3 Results

Down almost 60% from all-time highs, Air Canada is an undervalued TSX stock that remains an enticing investment in November…

Read more »

cloud computing
Investing

Where to Invest $10,000 in November

Given their solid underlying businesses and healthy growth prospects, I expect these two defensive stocks to outperform uncertain outlook.

Read more »

coins jump into piggy bank
Retirement

Here’s the Average RRSP Balance at Age 44 for Canadians

Holding stocks like Alimentation Couche-Tard (TSX:ATD) in an RRSP is a good way to build your wealth.

Read more »

dividends can compound over time
Dividend Stocks

Want a 7% Yield? The 3 TSX Stocks to Buy Today

These TSX stocks are offering high yields of over 7%, making them attractive for investors seeking steady passive income.

Read more »