The TSX today continues to be full of volatility, but that doesn’t mean investors aren’t looking for growth stocks. In fact, some companies have seen a surge in the last year, while others have dropped even further.
Yet one stock hitting the news lately has been NFI Group (TSX: NFI). The bus manufacturer recently reported earnings for investors. However, there were some warnings that came along with the numbers.
What happened
Shares of NFI stock reported another quarter that beat out earnings estimates. However, the quarter also had some downsides. NFI stock reported a loss of US$48.1 million for its latest quarter, which was an improvement from the loss of US$56 million the year before.
Revenue, however, surged by almost double. Compared to US$398 million in revenue last year, this year NFI stock boasted revenue of $659.6 million. The results also came with news that the company would be increasing its production for the second half of this year.
With the news, new full-year guidance came out as well. NFI stock expects to achieve revenue between US$2.6 and US$2.8 billion in 2023. This was an increase from between US$2.5 and US$2.8 billion made earlier in the year. Earnings before interest, taxes, depreciation and amortization (EBITDA) are now expected between US$40 and US$60 million, narrowing it further from between US$30 and US$60 million announced earlier.
But hold on
All of this looks like good news, right? But Chief Executive Officer Paul Soubry had a warning for investors. Temporary inefficiencies from supply-chain production that came about during the pandemic should continue not just next year, but through to 2025.
NFI stock still hasn’t fully recovered after its supply plunged during 2020. While there certainly has been a significant recovery, it still likely won’t be until 2025 when the stock is back at those levels. Still, vehicle deliveries climbed by 66% year over year, with its quarter-end backlog at 10,000 orders. This hit a record of US$6.7 billion!
By 2025, NFI expects to be back to around 1,500 units per quarter. This was similar to what it was producing back in 2019, Soubry said. Meanwhile, NFI stated there would be a private placement with an unnamed asset manager, in an effort to raise US$50 million and pay down debt.
Now what?
NFI stock was up just 2% on August 16 as the stock made its earnings announcement. So while the company reported record-setting results and sky-high revenue, the loss and future growth prospects seemed to bring things back down.
That being said, the stock looks valuable trading at just 11.1 times earnings as of writing. Shares are also still down 15% in the last year, providing some room for potentially major returns when the stock recovers. So there could certainly be an opportunity for future investors.
So if you have the time to wait, NFI stock looks like a valuable equity to hold in your portfolio, or at least have on your watchlist. In the next few years, as the company recovers, it could very well hit headlines again.
