Roth/MKM has launched coverage of North American Energy Partners (NYSE: NOA), assigning a Buy rating and setting a $25.00 price target. The stock is trading near $15.18 and has an approximate market capitalization of $428 million.
The research note points to an apparent valuation gap between NOA and more diversified mining services peers, a discrepancy Roth/MKM attributes to NOA's historical concentration in Canadian oil sands work. That legacy focus - the firm said - has weighed on market perception despite moves to broaden the business footprint.
Supporting the valuation view, data from InvestingPro indicate that NOA is trading below its Fair Value. The company carries a price-to-earnings ratio of 16.45 and an enterprise-value-to-EBITDA multiple of 4.28, metrics Roth/MKM and the InvestingPro figures flagged as attractive relative to comparable services providers.
Roth/MKM highlighted that as recently as 2023 the bulk of revenue for North American Construction Group - the operating business within NOA - was derived from services tied to the Canadian oil sands. The firm characterized those contracts as typically shorter in duration and therefore less stable than the longer-term engagements common in parts of the broader mining services sector.
Despite that revenue concentration and the shorter-term profile of many contracts, NOA has maintained a record of returning cash to shareholders. The company has paid dividends for 12 consecutive years and currently yields approximately 2.24%.
According to Roth/MKM, the company began diversifying its revenue base in the fourth quarter of 2023 by expanding into other jurisdictions. However, the analyst noted that market valuation has continued to track the legacy oil sands exposure rather than the evolving business mix.
Looking ahead, Roth/MKM projects 2026 as a pivotal year for the company. The firm expects that by 2026 Canada will represent less than 30% of NOA's estimated revenue, a shift that could prompt a rerating of the stock if the market recognizes the company as a more diversified mining services provider.
Context and implications
The initiation of coverage frames NOA as a stock trading at multiples that could be considered discounted relative to peers, while also flagging revenue concentration and contract tenure as structural considerations for investors assessing stability and upside potential.