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Bull Of The Day: North American Construction (NOA)

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North American Construction (NOA - Free Report) is a Zacks Rank #1 (Strong Buy) stock that posted solid numbers at the end of July which helped pushe the stock higher through the middle of August.  Since that time shares have been sliding back down, but now looks to be a good time for a deep dive into why this stock obtained the highest Zacks Rank.

Description

North American Construction Group Ltd. provides heavy construction and mining services primarily in Canada. It offers services to large oil, natural gas and resource companies. American Construction Group Ltd, formerly known as North American Energy Partners Inc., is based in Alberta, United States.

Earnings History

The most recent quarter caused the stock to spike.  I see the company reporting EPS of $0.29 when $0.13 was expected.  That $0.16 difference translates into a positive earnings surprise of 123%.  That has a way of sending expectations and the stock price much higher!

Prior to the most recent beat, the company posted 2 beats and 1 miss of the Zacks Consensus Estimate.  That average positive earnings surprise over the last four quarters is 40.7%, so the beats are pretty big in size.

Earnings Estimate Revisions

The key to the Zacks Rank is the movement in earnings estimates.  When you see positive estimate revisions you will see the Zacks Rank move higher and the stock will generally do the same thing.

I see estimates moving higher across the board for NOA.

There is a five cent increase over the last 60 days for the current quarter.

There is an eight cent increase over the same time period for next quarter.

The full year 2020 saw a huge move from $0.86 to $1.22 and 2021 jumped from $1.07 to $1.26.

Those sorts of moves will push a stock to a Zacks Rank #1 (Strong Buy)

Valuation

The huge beat came amid a significant topline contraction.  I see a -61% topline number, but as bad as that is, I love seeing the 5.7x forward PE.  The 1.3x price to book multiple is also nice and low and at the same time I see margins moving higher over each of the last three quarters. 

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