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Mitcham Industries

Much of the world’s surface has been mapped.  You can even capture an image of someone’s house via satellite on the other side of the world.  What we don’t know much about is what lies beneath the soil, socks and water.  Below the earth’s surface is a plethora of resources that have yet to be tapped.  

Mitcham leases and sells all types of geophysical equipment that are used to perform seismic and other studies for all sorts of industries around the globe.

Their products are an essential piece of the puzzles as we work to make the world a safer, more efficient place with sufficient energy to power our growing population.

Company Description & Developments
Mitcham’s products are an essential part of our energy solutions.  A project like Keystone XL would be impossible to complete.  Just about every major exploration or construction project needs research and studies before getting approved.  In the Keystone XL project alone there were hundreds of pages of ecological, sizemeic, soil, water studies that were performed.  Many of these studies utilized products sold be Mitcham.

We are becoming more cognizant of the effects that our population has on our earth and because of that laws are in place in most countries, states and municipalities to make sure the project is not only financially viable, but ecologically sensible as well.

The US alone is extremely deficient in the quality of our infrastructure.  Roads, bridges, electrical grids, dams are all aging and will eventually need repair or replacement. 

As populations grow and economies improve from here, there should be more demand for projects that utilize Mitcham’s products. 

In the short term, demand for Mitcham  should be mostly driven by improving consumer health and sentiment and MIND’s cheap valuations.

Financial Profile
Mitcham is a small-cap company (300 million) that is trading at about 17 times trailing earnings (P/E).  Looking forward, Zacks Consensus Estimates sees Mitcham’s Communication’s P/E dropping to 13.5, with no change in price from these levels.   

Mitcham became a Zacks Rank 1 stock on Friday.

Last quarter MIND reported sales growth of 40% year over year and 31% over the previous quarter with total sales of 71 million in FY2011. 

Earnings Estimates
Expectations are for Mitcham to make 69 cents per share this quarter when they report on April 10th.  Of the 3 analysts that cover the company, the consensus is for the company to grow earnings by 417% in FY2012 and 33% in FY2013.  Remember that percentages can look extreme when you jump from a small dollar amount like .54 to 2.34.

Mitcham surprised analysts to the upside by 100% last quarter, with the average earnings surprise being a positive 44%.  Small cap growth companies like this have a higher chance of surprises both up and down, due to the instability of their business and lack of deep analyst coverage.

Market Performance & Technicals
The stock has made some extreme moves over the past several months!  Since hitting a low of $9.52 in October, MIND has risen almost 158%.  This extreme movement is something to note and to perhaps be cautious of.  Small cap, lighter volume stocks such as MIND carry additional risk.  This is not something you want to own if you are not a risk taker.

Like many of the stocks we have been following over the past several weeks, it might be best to wait for the pullback before buying.    

Mitcham remains in a bullish channel, but we are seeing some consolidation between $21.50 and $25.  Another plus for the bulls is that MIND is firmly above its 50 and 200 day moving averages of $19.23 and $16.15 respectively.

Mitcham has outpaced the S&P 500 by 112% over the past year and almost 6% over the past month.  It is up 60% more than the S&P over the past 3 months alone!

Again, there is certainly momentum here,  but use caution and less exposure if you decide to trade MIND.

Jared A Levy is the Momentum Stock Strategist for He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.


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