This was a clear case of the market having no idea how to value...

This was a clear case of the market having no idea how to value MAD after its Quarterly Report on 30 January 2024.

On that day, the share price fluctuated from a high of $6.98 to a low of $5.72, an 18% range from the high. Then within only 3 trading days the share price closed at $6.70, 17.1% above the $5.72 low on the 30th.

I have seen this many times before in small to mid caps, and it's telling me that many investors sell on any negative news before fully analysing the report. Mader has rarely had any negatives in previous reports, so it's not surprising to me that was some negativity on the day. However, I have now fully analysed the results and am very happy I held. Here are my thoughts:

• The initial negative was the statement in the report that the North American business "experienced the finalisation of three large, fixed term work scopes, resulting in a short-term reduction in employee utilisation". That clearly scared a lot of investors.
• However, they may not have noticed the other statements about this NA business: "Underlying customer demand and market macros remain strong. Growth across the segment is again trending positively, which demonstrates the resilience of diversified revenue streams. Further, an influx of new talent through the Global Pathways Program is expected into the region over the next few months, which will enhance future growth" and "The Group’s unparalleled Global Pathways Program will continue to harness a global talent pool with 150+ skilled expatriate technicians committed to new adventures. Of these 150+, over 90 are actively engaged, providing specialist services on-ground in North America. Another 60+ technicians are expected to mobilise throughout 2024, joining the team to support significant customer demand in the region. "The Mader Trade Upgrade Program, an 18-month apprenticeship for Automotive Service Technicians to become Heavy Equipment Technicians is officially scheduled to commence in February 2024. The program is aimed at widening Mader’s talent pool to fulfil a significant unmet skills demand in Canada."
• Even with the above negatives, Q2 revenue growth in NA was a very healthy 46% in constant currency terms. NA revenue has gone from $10.6M in Q2FY22 to $31.1M in Q2FY23 to $45.7M in Q2FY24. I don't see this as a disappointment at all, given the outlook in the above dot point.
• Net debt is declining rapidly as free cash flow increases. It declined 17% in the quarter towards the medium term target of zero.
• Guidance was reaffirmed despite the "hiccups".

It's hard to find a better compounder than Mader. Its share price is now 8.2 times higher than when I bought in July 2020. I see no reason why this compounding won't continue given ROIC of over 30% and Mader's ability to continue investing in its business at these very high rates of return. It's normal for quality stocks such as this to have short periods of disappointment, but the rewards are there for the investor who is prepared to wait for the compounding to do its thing.