Bird Construction is engaged in the business of constructing industrial buildings and performing civil construction operations, including site preparation, concrete foundations, metal and modular fabrication, mechanical process work, underground piping, and earthwork for clients predominantly operating in the commodity sector.
Bird Construction appears extremely cheap and the stock has dropped over 50% over the last year. The company is a construction company in Canada, serving customers in the industrial, mining, institutional, retail, commercial, multi-tenant residential, light industrial, and renovation & restoration sectors using fixed priced, design-build, unit price, cost reimbursable, guaranteed upset price and construction management contract delivery methods.
The general contracting industry is highly competitive and consists of numerous buyers, ranging from governments to individual customers. Dealers include users of construction material as well as sub-contractors. The industry has easy barriers to entry including low buyer switching costs, weak brands and suppliers’ accessibility result in intense competition.
Since all business areas tend to be affected by global conditions, Bird Construction is a cyclical stock impacted by recessions and economic downturns. The company faces the same competitive pressure as other peers regardless of size. In 2019, the commodity downturn affected the company badly and caused a substantial decline in the company’s business activity.
Bird Construction holds $73 million in cash and $26 million in debt. The company maintains fairly small amounts of leverage and has a return on invested capital of 12.63%. The company has superb management focused on investment metrics and has been able to maintain a decent level of profitability, despite low barriers to entry. The company has maintained a generous dividend payout and looks set to do so for the foreseeable future.
The company has also taken several initiatives to invest in key business development relationships and enhance employee exposure. To achieve the latter, it identified key human resource measures to ensure appropriate education training is in place to drive positive engagement and create a more efficient workforce.
Furthermore, the company benefits from a succession planning program to promote top-class working professionals. With an ongoing work program in place and diverse workforce, a stable backlog, and an excellent management team, Bird Construction appears likely to provide superior risk adjusted returns over the long term.
In 2018, the company secured $1.5 billion of new contract work and executed $1.3 billion of construction revenues — a 9.6% increase from last year. In addition, the company’s strategy to diversify operations added value for shareholders.
The company also completed three partnerships in 2019: Stanton Territorial Hospital Renewal, Moncton Downtown Event Center, and East Rail Maintenance Facility. However, the company reported a net loss of $1 million on construction revenues of $1.3 billion compared to earnings of $9 million on $1.4 billion of revenues in 2017.
Bird Construction appears well positioned to build long-term shareholder value, and patient investors should profit handsomely from investing in the company’s stock.
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Fool contributor Nikhil Kumar has no position in any of the stocks mentioned.