Seismic activity in the oil & gas sector has increased markedly over the past decade as technology has allowed oil & gas to be recovered from previously unreachable deposits (both onshore and offshore). Firms that supply this sector should be in a sweet spot for the foreseeable future as long as oil prices remain high. One fast growing energy services firm that recently caught my eye due some recent catalysts, including a stellar earnings report, is Mitcham Industries (NASDAQ:MIND).
Key earnings highlights from Mitcham's earnings report and recent upgrades:
- Revenues increased an impressive 88% Y/Y to $37mm, significantly above estimates.
- Earnings per diluted share improved to 77 cents a share, blowing through estimates of 57 cents a share.
- The company says that it expects strong demand for seismic services through FY2013.
- Pritchard up its price target to $32 from $28 on MIND and reiterated its "Buy" rating in early April.
- The company should benefit from a speedier approval process brought about by high gas prices in an election year.
Mitcham Industries - "Mitcham Industries, Inc., through its subsidiaries, engages in the leasing, sale, and service of geophysical and other equipment to the seismic industry worldwide. The company operates in two segments, Equipment Leasing and Seamap". (Business Description from Yahoo Finance)
4 reasons Mitcham is a great growth play at under $24 a share:
- The stock is going for 7.5 times forward earnings, which is way under its five year historical average (25.8).
- MIND sells for a low five year projected PEG (.61) and it increased its operating cash flow by 250% from FY2009 to FY2011.
- Consensus estimates for FY2012 and FY2013 have moved up smartly over the past month and analysts expect over 20% sales growth in FY2012 and a 15% increase in FY2013.
- The median analysts' price target on the stock is $32 and given its $300mm market capitalization and niche product set, I think the stock should have a buyout kicker as it would make a logical acquisition for a larger oil services firm looking to build out its product line.