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Category: Stock Market and Perma-Pipe
Date: 10 September 2019 Stock Price: $9.15 We take a look at the 2nd quarter earnings release of their 2019 fiscal year of Perma-Pipe, a global leader of pre-insulated piping and leak detection systems for oil and gas gathering.
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About Perma-Pipe
Perma-Pipe International Holdings, Inc. (the “Company”) is a global leader in pre-insulated piping and leak detection systems for oil and gas gathering, district heating and cooling, and other applications. It uses its extensive engineering and fabrication expertise to develop piping solutions that solve complex challenges regarding the safe and efficient transportation of many types of liquids. In total, the Company has operations at eight locations in six countries.
Financial overview of Perma-Pipe's latest earnings report
The numbers we are interested in (for the quarter):
- Net sales $36.667 million (up from $32.325 million from the same quarter of the previous year)
- Cost of sales: $27.014 million (up from $26.432 million for the same quarter of the previous year)
- Net income: $3.720 million (up from a loss of -$275 thousands for the same quarter of the previous year)
- Diluted earnings per share: $0.46 (up from a loss of -$0.04 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 8.075 million (up from 7.820 million for the same quarter of the previous year)
- PE ratio: 4.97 (based on the earnings per share for the current quarter being reported for full fiscal year)
- Cash and cash equivalents: $8.052 million
- Cash and cash equivalents per share: $0.997
- Cash and cash equivalents makes up 10.98% of Perma-Pipe's market capital
- Cash and cash equivalents makes up 37.85% of Perma-Pipe's total assets
- Inventories: $16.555 million (up from $12.289 million for the same quarter of the previous year)
- Inventories makes up 14.45% of Perma-Pipe's total assets
- Inventories increased by 34.7% over the last year
- Total shareholders' equity of Perma-Pipe's: $55.302 million
- Shareholders' equity per share: $6.84
- So Perma-Pipe's is trading at 1.34 times the stockholders equity per share
- Cash generated from operations: $2.218 million
- Cash generated from operations per share: $0.275
- Cash generated from operations per share: $0.275
Perma-Pipe's management commentary on the results and earnings guidance
NILES, Ill.--(BUSINESS WIRE)-- Perma-Pipe International Holdings, Inc. (NASDAQ: PPIH) announced today financial results for the second quarter and six months ended July 31, 2019. President and CEO David Mansfield commented, "The second quarter rebounded from the seasonally weak first quarter. Revenue was $12.4 million better than the first quarter of 2019 and income from operations before income taxes improved $4.7 million to $3.5 million."
"Despite flat revenues for the first six months of 2019 compared to the same period last year, notable improvements in our margins led to an increase of $3.1 million in income from operations before income taxes, from a loss of $0.8 million last year to $2.3 million for the year to date." "Our backlog stands at $63.9 million, continuing at the strong levels previously achieved at the end of the same period in the prior year", continued Mr. Mansfield. “It is encouraging to see the improving trend continuing to confirm our progress in returning the company to profitability” concluded Mr. Mansfield.
"Despite flat revenues for the first six months of 2019 compared to the same period last year, notable improvements in our margins led to an increase of $3.1 million in income from operations before income taxes, from a loss of $0.8 million last year to $2.3 million for the year to date." "Our backlog stands at $63.9 million, continuing at the strong levels previously achieved at the end of the same period in the prior year", continued Mr. Mansfield. “It is encouraging to see the improving trend continuing to confirm our progress in returning the company to profitability” concluded Mr. Mansfield.
Perma-Pipe (NASDAQ: PPIH) stock price history
The image below shows the stock price history of Perma-Pipe for the last 5 years. And sadly for stockholders its not been a good time. 5 years ago the stock was trading at around $10.50 and its currently trading at $9.15. So while the stock price decline is not that significant, the opportunity cost of holding Perma-Pipe stock instead of some of the other stocks we have valued recently that showed growth of well over 100% over a year period.
Perma-Pipe (NASDAQ: PPIH) latest stock valuation
So what are Perma-Pipe stock worth following the release of their latest earnings report? Our valuation models set a target price of $11.40 a stock. So at its current price we do believe Perma-Pipe is undervalued and offers long term and fundamental value investors a good buying opportunity into the company. We believe value can be found at 10% or more below our target (full value) price. So anything below $10.30 we see as good price to enter the stock.