Topic: Growth Stocks

Growth stocks: Major Drilling profits from high gold and base metal prices

Major Drilling, symbol MDI on Toronto, is a large contract-drilling firm that mainly serves the mining industry.

In the three months ended July 31, 2011, Major’s revenue rose 49.9%, to $164.2 million from $109.5 million a year earlier. Earnings per share jumped 257.1%, to $0.25 from $0.13.

During the quarter, many of Major’s customers increased their drilling activity to take advantage of record gold prices and high base metal prices. Gold mining firms supply 48% of Major’s revenue, followed by base metal and uranium miners (35%), and energy, coal and environmental drillers (17%).

The strong results prompted Major to raise its twice-yearly dividend by 9.1% with the November 2011 payment, to $0.08 a share. The stock now yields 1.3%.

Growth stocks: Major counts on specialized drilling for competitive edge

The company holds cash of $19.8 million, or $0.28 a share. This growth stock’s long-term debt of $24.6 million is only 2.7% of its market cap.

Earlier this month, Major announced that it has agreed to acquire Bradley Group Limited, a drilling company based in Rouyn Noranda, Quebec. The acquisition will add 124 rigs to Major’s current base of 571 rigs.

With its specialized drilling capabilities and strong balance sheet, Major Drilling remains better positioned to profit than many of its competitors.

We updated our advice on Major Drilling and other growth stocks in our September 9, 2011, Stock Pickers Digest hotline, which you can immediately view when you take a 1-month free trial to Stock Pickers Digest. Click here to learn how you can start profiting from Stock Pickers Digest right away.

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