Your warning is valid Decrisper. Margins have dropped...

Your warning is valid Decrisper. Margins have dropped considerably, however the margins achieved in 2011/12 were peak values and weren’t sustainable. The industry is back to more traditional margins and those who survive will prosper long term. All evidence points to NWH being one of the survivors.

The share price has adjusted for the thinner margins and reduced revenue, dropping 60% from almost $4 at peak margins. I’m working on FY14 EPS of 16 cents, which means it is currently trading at PE 8 - the market expects declining earnings. I think this is overly pessimistic as I expect flat earnings for the next 18 months and then a pick up in earnings, either from increased activity or decreased competition - that is, if activity doesn’t increase, some competitors will move out of this market. A PE of 10 is justified. On a ROE basis, fair value is in the 1.60-1.80 range.