It’s true that many TSX stocks have been soaring in the last few years. This is not really surprising, given that the S&P/TSX Composite Index continues to hit new all-time highs. Today, the index is trading at just under $30,000, for a one-year return of a staggering 21%.
Yet, while this is certainly a very good return, Badger Infrastructure Solutions Ltd. (TSX: BDGI) is performing way better than the TSX Index. Up 71% in the last year, here’s why I think that this soaring TSX stock is one to buy as it’s positioned for continued success and outperformance.
What is Badger?
Badger is the largest provider of non-destructive excavating and related services in North America. The company’s proprietary hydrovac excavation trucks can operate in the most sensitive and confined spaces. This makes Badger the ideal construction partner in critical infrastructure-type projects.
Today, Badger’s customers include a diversified list of small and large companies in a variety of geographies and industries. And in recent months, these customers have been progressing with their projects, and Badger is therefore seeing its momentum building. For example, work on data centres, airports, light rail, petrochemical and liquified natural gas (LNG) facilities are all gaining momentum.
This TSX stock is flying – for good reason
As you can see in the graph below, Badger Infrastructure’s stock has performed exceptionally well in the last year. The stock is currently trading at 34 times this year’s expected earnings and 23 times 2027’s expected earnings. In my view, the stock is deserving of these premium multiples. I would therefore have no problem buying the stock at these levels.
In the last five years, the company has seen its revenue grow by 79% to $745 million and its operating cash flow increase by 40% to $146 million. To top it off, Badger’s annual dividend per share has also been growing at a healthy clip. In the last five years, the dividend increased 25% to $0.75 – this represents a compound annual growth rate (CAGR) of 4.5%.
Why I like Badger
Today’s high-flying market makes me a little nervous. But Badger, in my view, is fully deserving of its share price outperformance and valuation. This is because the company is a defensive business that also has a high growth profile.
You see, Badger is benefitting from some clear secular trends. First, we have aging North American infrastructure that needs to be replaced, refurbished and/or updated. For example, lead pipe replacement programs, water treatment facility upgrades, and investments in bridge construction are all growing.
Second, we have the renewable energy push, which is only intensifying. This will require new infrastructure to support renewable energy, such as nuclear energy and electrification projects. Also, we have the LNG industry that’s on a healthy secular growth path, and finally, the buildout of data centres. Badger is well-positioned to benefit from all of these trends, as the company has a competitive advantage with its trucks, scale, and diversification.
The bottom line
Badger Infrastructure is one TSX stock that I’ve liked for a long time now. It’s not talked about too often, but I think investors should consider this quality TSX stock as it will likely continue to outperform the market. Simply put, this is a stock to buy and hold right now.
