Energy Headwinds Abating While Cost Structure Improves… I looked at this company some months back trading below a twoonie but I couldn’t pull the trigger as its concentration in energy was far too great given the collapsing price of crude. Now that crude has recovered I have to take another look with it trading in the upper twos; shoulda woulda coulda bought it then.
Fundamentally it looks like Joel was the right guy for the job. I don’t care who the CEO was I don’t believe anyone could have grown revenue YoY the last three quarters given what the energy industry went through. The ability to cut SG&A 40% YoY is massive, especially given that in Q2 2015 SG&A represented 126% of revenue down to 70% of revenue in Q2 2016 on a relatively stable revenue base, clearly there was a lot of excess to cut. Combined with the operating leverage that is now inherent within the business model bodes well as energy recovers combined with their initiative to diversify into other verticals.
You can reasonable estimate profitability in 2017 and 9-12 months ago I don’t know if you could have said the same given the leaner cost structure being put in place.
With earnings tomorrow the revenue figure might be weak but the market conditions for crude was in the 20s going into Q3 and in the 40s on the way out so they should have had some momentum going into Q4. If they can continue to reduce SG&A (Looking for <$1,700,000) while maintain a gross margin figure in the mid-40s percent range I believe people will look through any moderate weakness in revenue (or at least I will).
How can you not like a CEO who buys 3,100 shares in the open market a couple weeks ago before his earnings are released?