MDU Offers Growth Potential as Economy Normalizes
MDU Resources Group Inc. (MDU) operates in regulated energy delivery, construction materials and services business. Started in the year 1924 as the Minnesota Northern Power Company its businesses segments include electric, pipeline, natural gas distribution, and construction materials. As the country is coming out of the pandemic and focusing on the reinstatement of the construction and development activities companies like MDU are going to be the beneficiaries.
A Quick Look a Year Into The Pandemic
MDU stock reached a low of 18.38 USD in March 2020 during the worst month in the stock market because of the COVID pandemic. However, it has just gone north from that point onwards to reach a level of 30 USD in March 2021. The rally on the stock has been in tandem with the overall market and bulk of the up move has been witnessed in the last 3 months. As the economy is reviving and there are signs of coming back to normalcy these brick-and-mortar businesses are going to show their strength in next few months. Let’s evaluate how the stock is performing on some of the pillars which are essential for fundamental analysis.
The P/E of the company stands at 15.78 which makes it reasonably priced as it is still below the P/E of 20 which can be considered as a perfect equilibrium position. With a market cap of 6.15B and consistent dividend yield of 2.77% the company is well poised to attract some of the conservative investors who can rely on dividend income to provide some cushion during the uncertain times.
The profit margin of 7.05% may not look the best but it is decent for the industry it operates in. The trailing twelve months revenue of 5.53B looks good considering the market cap of 6.15B. Total debt of 2.38B is on the higher side considering the market cap of the company. However, the growth outlook looks rather good for medium term and the operating cash flow is going to be decent as well.
In summary the stock has good fundamentals and a decent track record of paying dividends. Even though the stock has gone through decent up move but still there is scope of further upside as the economy comes back on track and the construction activities goes up to pre-COVID levels.