CASE STUDY: Perma-Pipe International Holdings (PPIH)

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November 3, 2024

Perma-Pipe International Holdings (PPIH) makes specialty pipes which have coatings and linings for various harsh-condition transportation of oil, chemicals, and water. End markets are oil & gas, chemical, and infrastructure.  PPIH also makes leak detection systems.

In the company’s most recent quarter, it reported EPS (earnings per share) of $0.40 versus $0.13 in the prior year.  Furthermore, PPIH has a backlog of $75.5 million, which does not include $46 million in additional rewards secured subsequent  to the end of the quarter.

The company is poised to continue increasing its EPS if they can continue increasing their revenues.  This is a real possibility because PPIH provides products and services to Middle East regions that are investing in long-term infrastructure projects.

The market cap is $101.9 million, while enterprise value is $128.0 million.

Here are the metrics of cheapness:

    • EV/EBITDA = 5.42
    • P/E = 6.65
    • P/B = 1.49
    • P/CF = 6.78
    • P/S = 0.65

ROE is 28.3%, which is good.

The Piotroski F_Score is 7, which is quite good.

Insider ownership is 11.1%, which is decent.  Cash is $9.5 million, while debt $35.5 million.  Total liabilities to total assets is 51.9%, which is OK.

Intrinsic value scenarios:

    • Low case: If there’s a bear market and/or a recession, the stock could decline.  That would be a buying opportunity.
    • Mid case: The company should have a P/E of at least 12.  That would mean the stock is worth $23.06, which is about 80% higher than today’s $12.78.
    • High case: Arguably, the company should have a P/E of 15.  That would mean the stock is worth $28.83, which is over 125% higher than today’s $12.78.
    • Very high case: If PPIH can continue to ramp its revenues, the P/E could reach 20.  That would mean the stock is worth $38.44, which is 200% higher than today’s $12.78.

 RISKS

    • If there’s a bear market or a recession, the stock would probably decline.
    • If the company does not continue to win new business, revenue and earnings would decline.

 

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