Shares of Badger Infrastructure Solutions (TSX: BDGI) have risen significantly over the last year. Shares of the infrastructure stock are already up 49% in the last year alone, but zoom in and you’ll see that’s mostly been in the last six months.
Badger stock has risen a whopping 80% since last June. So what on earth is going on with this stock, and is there more room to grow? In short, absolutely.
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Cuts are coming
While we still aren’t clear about when cuts are coming, interest rate cuts will come eventually. And likely before the end of the year. In fact, we could hit June when we see rate cuts, and this alone would have a positive influence on Badger stock.
And one of the areas that should benefit the most? Infrastructure. Interest rates have been especially hard on this area, as there can be a huge backlog of projects while they wait to take out loans. The cost of supplies, building homes, bridges, roadways, and more have all risen thanks to inflation. All this has contributed to infrastructure company profitability and their potential for growth.
Yet once inflation and interest rates come down, Badger stock and other infrastructure companies should be able to soar upwards once more. They’ll be able to take out reasonable loans, and see a surge in chipping away at backlog projects.
OK, but why Badger stock?
Badger stock hit 52-week highs, but there is still a lot of value here. The company trades at a lower price-to-earnings ratio than its peers. Therefore, you’re already getting good value for the stock, even though it’s at these heights.
What’s more, the company has been coming out with strong earnings reports, with more on the way. The company last reported their third quarter results, reporting record revenue of US$195.6 million. This was up 20% year over year! Furthermore, it improved its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin to 26.9% from 21.6% the year before.
The stock remains focused on profitability, with profits soaring back to historic levels. It now looks on track to reach its target EBITDA of 28% to 29% by 2025. We’ll certainly hear more about this then when earnings come out February 29, 2024.
Expansion continues
Badger stock, meanwhile, continues to expand its operations. This has been happening through a few strategic initiatives. The company has expanded its manufacturing footprint in Red Deer, AB, increasing production capacity and meeting the growing demand for “non-destructive excavation services.”
They’ve also been adopting more technology, with new tools use to improve operational efficiency, and streamlining the business. Add in that the company has made some strategic retirements as well, getting rid of older units and refurbishing its fleet. This should improve overall performance and costs.
And with a new board chair at the helm, these kinds of initiatives look to continue. The company appointed Stephen Jones last November, who wants to focus on strategic expansion and growth. So if you think Badger stock is done, think again. It seems like it’s just getting started.
