The answer to the GV puzzle is in this article. Their p/e is 75-80% less than its peers. Even with this run the market cap is under $100 million. Bottom line is I see this pull back as a healthy correction. I expect the target of around $6.25 to be achieved at some point this year.
Goldfield is a leading provider of electrical construction and maintenance services in the energy infrastructure industry primarily in the southeastern, mid-Atlantic, and western regions of the United States. The company specializes in installing and maintaining electrical transmission lines for a wide range of electric utilities. Goldfield has been growing rapidly with revenue growth of 161% for the first 9 months of the year. Furthermore, EPS for the first nine months swung from -$0.03 in 2011 to $0.30 in 2012.
GV stated the following in the Q3'12 earnings report: "About $24.4M of the current backlog is expected to be completed in the fourth quarter of this year." That should result in the highest revenue quarter of the year and the fifth consecutive quarter of sequentially increasing revenue. However, investors are a bit skeptical as a large part of backlog is one big contract. I think that there are many reasons to be optimistic and that investors shouldn't be so skeptical. Here are the reasons for my optimism going forward:
The macro trends for the power grid industry suggest increasing revenue as identified above.
A director, Jeffrey Eberwein purchased 140,000 shares in the month of November. That is a significant sized purchase for a name of this size. Insider buying is often a sign that the stock is undervalued particularly when purchases of this size are made.
The company made a large investment of $7.9M in additional equipment in July of this year. They have steadily been investing as property, building and equipment has increased by $13.6M in the first nine months of the year to $24.1M from $10.5M. It seems highly unlikely that the company would invest this much in equipment if significant follow on orders were not expected.
The company stated the following in their Q3'12 PR: "With the strong team we have assembled, we believe we are well positioned to take advantage of future opportunities to build on our record growth." Their comment seems to indicate that they have plenty of additional growth ahead of them.
Other names in this space are expected to grow in 2013 (see commentary below).
The table below shows some metrics for these five companies. As you can see from this table, GV appears to be very undervalued based upon it's tiny PE which is a mere fraction of it's peers. I believe that the skepticism shown by this PE will prove to be unfounded for the reasons identified above. Because of this low PE, I believe GV is the most undervalued in this growing field and thus is the most attractive.
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