With the TSX Index on the cusp of a breakout, many Canadian investors may be wondering if it’s time to back up the truck on some of the market’s high flyers. Undoubtedly, the TSX is heavy in the energy and financial sectors, the former of which has been quite hot, while the latter is most definitely not.
Either way, there are less-represented sectors and industries that I believe could be key to solid returns over the next two to three years. As the market rally looks to continue through the second quarter of 2024, perhaps more love should be given to the small- and mid-cap names, many of which have been quietly blasting off in recent months and quarters.
Undoubtedly, mid-cap plays have more market runway to run down! Though many have intriguing competitive edges, they’re less likely to get as much investor attention as the best blue chips atop the market.
Indeed, less coverage can be a good thing for value investors looking to land big bargains. In this piece, we’ll check out one mid-cap stock that’s awakened in a big way. And though shares may be hot, with higher highs likely on the horizon, I still view the name as a worthy buy now that the fundamentals are having an opportunity to shine.
Badger Infrastructure Solutions stock: A mid-cap at fresh new heights
Consider shares of Badger Infrastructure Solutions (TSX: BDGI), one of my favourite mid-cap Canadian stocks to consider now that it has found a way to improve upon its past margin issues. The stock goes for 30.6 times trailing price-to-earnings (P/E) but may be cheaper than it seems on the surface, given potential catalysts on the horizon. The mobile non-destructive hydrovac excavation services provider has a massive market opportunity across North America, as it looks to help various infrastructure, energy, and telecom firms safely maintain (or improve) their underground assets.
Looking ahead, Badger will do its best to try to hit its 2025 strategic milestones. This includes bolstering its presence in the U.S. market, as well as hitting $30,000 in revenue per truck per month. That’s a big deal. I believe Badger is back and could still prove undervalued at just north of $50 per share. Indeed, management deserves credit for dragging Badger out of its multi-year funk.
As various industries (think energy and utility) begin to prosper again, demand for Badger’s services could continue to stay robust. Either way, the 1.4% dividend yield looks bountiful and poised for solid growth through the next few years.
Foolish bottom line
In many ways, Badger seems to be a wonderful business. While mobile soil excavation is not exciting, it does open the door to substantial growth. As long as Badger continues to focus on operating efficiencies, I do not doubt the firm’s ability to expand long term.
While I’d love to buy shares of BDGI on a pullback, I’d not be afraid to initiate a starter position right here at new highs, even after nearly doubling since the depths of last fall.
