I think the key is a reversion to the mean on margins. Right now SSM is still coming off a cyclical high of work (its reducing, but its still high).
From memory around 10 years ago, wasn't SSM generating around 6-7% EBITDA margins against revenue (this is before the stuff up period of 2013-2014).
So a quick way to get a feel for sustainable 'through the cycle' earnings is to run the future revenue expectations by 7% (take the upper of the long term historical margin) to get forecast EBITDA and then run down the numbers to get EBIT and NPAT.
From my quick review, earnings are still at risk of falling further.
Book value is $0.79
When the cycle turns SSM has traded far below book value.
So for me as a 'look through' investment, I will start acquiring a first position around book value. If the cycle turns very negative, I can dollar cost average down from $0.79 knowing that as the cycle returns I will make profit with time and patience.
So around $0.79 is when I will start to show more interest.
SSM Price at posting:
86.0¢ Sentiment: None Disclosure: Not Held
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