The stock has stalled recently and that’s OK but I wonder if they have taken “ their eye off the ball” and may suffer the consequences. This is more of a gut feeling than sound analysis but your thoughts on EIF would be appreciated.
Thanks. Derek.
We would really second-guess management yet on the rationale of the capital investment projects recently, as the outcome of such investments could likely take years to pay off. Northern Mats was a significant investment ($253M) but the recent purchase was hardly material at $19M. EIF is a disciplined operator with a track record of reinvestment to grow, and we would be comfortable with the company’s capital allocation policy of reinvestment due to its track record of minimal asset write-offs. EIF is also committed to a progressive dividend policy over time, which we like. Investors do need to get comfortable with is the leverage level of consistently around 3.5x net debt/EBITDA. But EPS has gone from $2.14 in 2016 to an estimated $4.26 next year. For now, we will give management the benefit of the doubt.