$TH: Strong trend with low riskTarget Hospitality is a company that provides modular accommodations and services for various industries, such as energy, government, and construction. The company has a large share of its revenue coming from government contracts, which are long-term and stable sources of income. The company has recently secured a government contract with a minimum value of $575 million, which accounts for about 73% of its expected 2022 revenue. The company also raised its full year 2021 financial outlook by 7% for revenue and 9% for adjusted EBITDA, reflecting strong customer demand and cash flow generation.
It has a diversified customer base across different sectors and regions, reducing its exposure to any single market or customer.
It has high barriers to entry due to its scale, network, quality, and safety standards, giving it a competitive advantage over other providers of modular accommodations.
It has a strong balance sheet with low debt and high liquidity, allowing it to invest in growth opportunities and withstand any market volatility.
It has attractive valuation metrics compared to its peers, such as price-to-earnings ratio (P/E), price-to-cash flow ratio (P/CF), and enterprise value-to-EBITDA ratio (EV/EBITDA).
It benefits from macro trends such as increased government spending on infrastructure projects, defense initiatives, border security, disaster relief, and environmental protection. These trends could boost the demand for Target Hospitality’s services and create new opportunities for expansion.
Last but not least: the weekly and monthly chart are trending up steadily and it was exhibiting relative strength during recent market weakness.
Best of luck!
Cheers,
Ivan Labrie.
