"If I remember correctly, Market Index has a strong buy on it and a 12 month forecast of $1+"
Not sure who, or what Market Index is, but for the stock to undergo and form of meaningful re-rating, that can be sustained, is going to require a step-up of a few hundred basis in operating margin.
Because the current ~5% EBIT on Sales is too skinny to justify the inherent risks involved in this industry.
Anyone can win work; it's converting that work properly to the profit account that matters.
So I hope they are pricing all these recently-won contracts in a manner that adequately offsets the cost pressures that are prevalent across the inputs into the business.
Because if EBIT margins aren't above 600bp, and trending to 700bp over the next 12 months, then for mine, the investment thesis no longer holds (the recent $80m acquisition of ALS Asset Care will do its bit to raise the group's operating margin, given ALS Asset Care's EBIT margin is estimated by me to be somewhere around the 7.5% level.)
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SRG Price at posting:
72.0¢ Sentiment: None Disclosure: Held
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