Major Drilling is getting near 52 week lows again. I have kept a core position and trade another tranche of shares buying in the low 8's and selling in the low 9's. I have done well so far and I still think MDI should do well in an intermediate time frame because it has virtually no debt, is the leader in their field (drilling for minerals) and it is in what is supposed to be a growth area (looking for more mineral deposits so that we will have enough metals to electrify the world). So why does MDI keep trading down to less than 10 PE? I am quite happy to pick up so more MDI shares at a level that I think is cheap. Do you think MDI is cheap in the low $8 range?
We certainly can say it is cheap. It also has a healthy balance sheet ($88M cash) and strong cash flow. Investors have long memories, though, and the company lost money (a collective $200M) in the years 2014 to 2020. It lost money every single year of that period, though only had one year of negative cash flow (2017). It discontinued its dividend in 2016 so lost 'income investors' at that time. Forecasts call for low growth: a small EPS decline is expected in 2024 and about 6% growth is expected next year. The share count growth has been reasonably low. Four groups own more than 55% of the company, and this can be a detriment for large investors considering a position. Historically, it has had higher multiples, and with its strong financial position we think value investors can make money here, with some patience.