Badger Daylighting (TSX:BAD) has surged 66% in the past year, despite reporting a loss of $5.4 million in the chapter 11 bankruptcy filing of the customer, Pacific Gas and Electric (PG&E). Badger Daylighting performed work for PG&E after a 2018 wildfire in which PG&E was deemed complicit. The bad-debt loss amounts to roughly $160,000 per share and represents 26.5% of Badger’s 2018 emergency response revenue of $20 million.
In addition to the bad-debt loss, one of Badger’s long-time directors resigned at the end of 2018 after the corporation voted not to disclose a cash-and-shares buyout proposal. The director is David Calnan, a founder of Nerland Lindsey Law.
While Badger will bounce back from these setbacks, investors may want to think carefully before doubling down on its stock. WSP Global (TSX:WSP) or Aecon Group (TSX:ARE) may offer more value to shareholders next year.
Badger Daylighting is a global industrial engineering and construction company which provides services to a diversified set of industries including utility, oil, transportation, and mining. In addition to emergency response services, Badger plays a crucial role in the installation of traffic signals and water main repair.
One of Badger’s long-time utility customers, PG&E, filed for bankruptcy last year after being sued for negligence tied to one of California’s most deadly wildfires. The wildfire, which destroyed almost 14,000 homes and killed 85 people, was caused by an outdated 115kV transmission line. Although California’s energy companies preemptively cut power to at-risk grids, the Public Safety Power Shutoff Program does not apply to 115kV transmission lines.
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Founded in 1959, WSP Global manages engineering projects for urban infrastructure and oil pipeline projects for government and enterprise clients. The company also supports industries such as food and beverages, pharmaceutical, automotive, and chemicals.
WSP Global has a price-to-book ratio (P/B) of 2.4, which is relatively cheap compared to Badger’s, which stands at nearly five. The P/B ratio measures the ratio of stock’s market value to the net assets of the company. Value investors tend to want to avoid high P/B ratios, as they indicate less asset value per dollar of the stock’s price.
Founded in 1877, the Aecon Group is one of Canada’s oldest corporations. It supports government and enterprise clients in infrastructure development projects throughout Canada and the United States. These infrastructure projects include the construction of transit systems, hydroelectric facilities, and renewable power plants.
Aecon Group has a low price-to-cash ratio (P/C) of 2.35, indicating a higher value per dollar of the share price than Badger. In addition, Aecon’s stock price performed well last year; it yielded a 35% return to shareholders, including the 2.6% dividend yield. On the downside, the Aecon Group increased its debt load by 13% — a sign that the company may be unable to maintain the same share price momentum going into 2020.
Badger Daylighting has had a remarkable run on its stock price in the past year. Nevertheless, the stock’s recent involvement in PG&E’s bankruptcy and the loss of one of its most prominent directors forebodes a decrease in momentum. Thus, it is probably time for investors to look for buy opportunities in other stocks.
For investors interested in engineering and construction, stocks like WSP Global and the Aecon Group offer more value per share — without the drama.
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 Debra Ray has no position in any of the stocks mentioned.