In my opinion, one of the most interesting companies dedicated to providing services to global energy players and mining firms is Civeo Corporation (NYSE:CVEO). Despite having a difficult time when energy prices were far lower than they are today, this accommodations business has shown strong signs of recovering. Fundamentally speaking, things are going quite well for the enterprise. Revenue is rising and cash flows are attractive. Some investors may be turned off by the opportunity because of the surge in share price the enterprise has seen in recent months. However, I would make the case that the company still offers upside potential so long as its current strength remains. It is because of this, that I maintain my ‘strong buy’ rating on the business.
Recent performance has been stellar
The last time I wrote an article about Civeo was in November of 2021. At that time, I acknowledged the historically mixed performance of the enterprise. But at the same time, I ultimately characterized its performance as generally positive. Ultimately, I also said that shares were very cheap and that they offered strong upside potential for long-term investors. Since then, my call has played out quite well. Investors who had purchased stock in the company when I last wrote about it would have generated a return of 25.4%. That compares to the 12.2% drop experienced by the S&P 500 over the same timeframe. But that's not all. Earlier in 2021, in May to be exact, I wrote another article extolling the opportunity the business offered. I had the same rating for the company then as well. Since the publication of that article, shares have surged by 62.1%. That compares to the 1.7% decline experienced by the S&P 500.
Based on how strong performance has been for Civeo’s share price, you might think that fundamental performance has been robust as well. And for the most part, you would be right. When I last wrote about the firm, we only had fundamental data covering the first nine months of its 2021 fiscal year. Fast forward to today, and we now know how 2021 ended and we also have data covering the first quarter of 2022. For 2021 as a whole, revenue for the company came in at $594.5 million. That compares favorably to the $529.7 million generated in 2020. By other accounts, Civeo also fared well in 2021. Although the company did generate a net loss, the size of it was just $0.6 million. That compares to the $136.1 million the company lost one year earlier. Operating cash flow did worsen year over year, falling from $117.4 million in 2020 to $88.5 million in 2021. If we adjust for changes in working capital, however, the picture worsened only modestly, with the metric falling from $97.5 million to $97.3 million. Meanwhile, EBITDA for the company expanded, rising from $99.5 million in 2020 to $109.1 million last year.
Fundamentally, the picture for the company has largely improved in the short time that we do have for 2022. In the first quarter of the year, revenue came in at an impressive $165.7 million. That represents an increase of 32.1% over the $125.4 million the company generated one year earlier. Management expects this growth to continue for much of the year, with revenue likely to come in for all of 2022 at between $660 million and $675 million. At the midpoint, that would imply a year-over-year growth rate of 12.3%.
From a profitability perspective, the picture is also currently improving. In the first three months of the company's 2022 fiscal year, for instance, the firm generated a profit of $0.9 million. That compares to the $10 million loss experienced one year earlier. Operating cash flow did worsen year over year, falling from $12.8 million to just $2 million. If, however, we adjust for changes in working capital, it would have actually risen from $12.9 million to $23.7 million. Another metric that also improved during this time frame was EBITDA. According to management, this came in at $16.2 million for the first three months of 2021. This year, the reading was $25.6 million.
For the 2022 fiscal year as a whole, the picture does get a little less exciting. For instance, EBITDA for the company is forecasted at between $95 million and $102 million. At the midpoint, that would represent a decrease of 9.7% compared to what the company generated in 2021. No guidance was given when it came to other profitability metrics. But if we assume that operating cash flow would decline at the same rate that operating cash flow is set to do, then it should come in at around $87.8 million on an adjusted basis. For those worried about debt, the one thing I can say is that the picture doesn't look all that bad. Even if the company does not reduce net debt by the end of this year, instead relying on the numbers we have today, the 2022 results would imply a net leverage ratio of just 1.72. This compares to the 1.55 reading that we get if we rely on 2021 results.
Valuing the company is fairly simple. If we use the 2021 results management provided, the business is trading at a price to adjusted operating cash flow multiple of just 3.6. This increases only modestly to 4.1 if our 2022 estimates turn out to be accurate. Meanwhile, the EV to EBITDA multiple of the company should be 5.7. That rises to 6.3 if we rely on 2022 estimates. When I last wrote about the company, I had forecasted 2021 results. At that time, the price to operating cash flow multiple which was calculated to be 3.9. And the EV to EBITDA multiple was 6.2. So, pricing for the company has not changed significantly since I last wrote about the firm, even as shares are up materially.
Based on all the data provided today, I can say with confidence that Civeo makes for an interesting prospect. Fundamentally, the company looks to be quite robust. Obviously, its fortunes will fluctuate based on what happens in the energy and mining markets. But as of now, the future looks bright. Even if fundamentals worsened, shares look to be trading at incredibly cheap levels right now, leading me to further rate the company a ‘strong buy’ prospect.
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