Canada’s energy sector has been one of the TSX’s worst performers since 2014. Ultimately, it will take a marked improvement in the price of crude oil to really jumpstart the sector again. Investors just don’t see that happening anytime soon.
Enterprise Group Inc. (TSX:E) is a good way to play a recovery in the sector. The company provides specialized equipment and services to companies building energy production, utility, pipeline, and energy transportation assets. Enterprise has many of Canada’s top oil companies as customers.
Naturally, this hasn’t been a good place to be of late. In 2014, the company booked $79.6 million worth of revenue. In 2016 that number collapsed, with the top line only hitting $28.7 million. Net profit fell from $0.12 per share to a loss of $0.23 per share.
Enterprise has done a respectable job cutting expenses to deal with the downturn. Although 2016’s net income was negative, it did manage to post cash flow of nearly $4 million. The company was also consistently profitable when the sector was healthier.
Its balance sheet is also fine. Enterprise has $84.6 million in assets versus $22.9 million in debt. $1.2 million worth of debt comes due in 2017, with most of the remainder not scheduled to be repaid until 2020. Additionally, shares have a book value of $0.78 each on a fully diluted basis, versus the current price of $0.32. That’s cheap.
Finally, management is putting their money where their mouths are, so to speak. In 2016, Enterprise’s management team increased their ownership stake from 6.7% to 18.4% of the company. Value investors always like to see insiders buying shares.
