McDermott International: Simply the Best in Infrastructure

Sometimes a company is simply the best in its sector. And yet, it's overlooked. In the infrastructure space, Fluor Corporation (FLR), Foster Wheeler (FWLT), Jacobs Engineering (JEC) and The Shaw Group (SGR) are clearly the leaders. Yet if you look at the numbers, you'll find that McDermott International (MDR) is the cheapest and has the best fundamentals.

click to enlarge

MDR has the lowest PE of the group despite having the best operating margins, ROA, revenue and growth of the above. Some of others have a faster growing backlog of business, but MDR's book of business is still nothing to sneeze about going from 8.6 to 9.3 billion last quarter. Not bad for a 10 billion dollar cap company. I suspect that some of the other players are growing their businesses too fast, taking orders at too low a bid -- thus MDR is able to achieve 11% operating margins, while the others are lower. MDR is in a great sector -- infrastructure for oil and gas, power, and government with a lot of Middle East exposure. No debt and a 700 million dollar cash balance add to the strength of this unfairly ignored company.

Disclosure: Author has a long position in MDR

Comments

[locke]

These guys don't pay a dividend. In questionable economic times, dividends are a requirement, in my opinion.