DMC Global is a Buy, says Roth

Roth Capital Partners analyst Gerry Sweeney continues to like metalworking company DMC Global (DMC Global Stock Quote, Charts, News, Analysts, Financials NASDAQ:BOOM), maintaining the stock’s status as a top 2023 pick for Roth heading into the new year. In a Friday Company Note to clients, Sweeney reiterated a “Buy” rating on DMC, saying the company should experience moderate expansion in both demand and pricing this year compared to 2022.

Headquartered in Broomfield, Colorado, and founded in 1965, Dynamic Materials Corp or DMC Global operates with three business segments. NobelClad produces explosion-welded clad metal plates for constructing pressure vessels and heat exchangers, DynaEnergetics manufactures, markets and sells perforating explosives for the Oil & Gas indsutry and Arcadia makes custom windows, doors and framing systems for low and mid-rise buildings. 

The $360-million market cap company has seen its share price drop over the past two years from $65.00 to now under $20.00, but Sweeney sees upside from current levels, pairing his “Buy” rating with a maintained 12-month target of $30.00, which at press time represented a projected return of 64 per cent.

“BOOM remains a top 2023 pick. The DynaEnergetics business remains poised to benefit from market share, pricing and industry expansion driving an estimated 14 per cent year-over-year growth. Meanwhile, Arcadia continues to be a positive contributor with investments (ERP, painting and anodizing) helping to position the segment for growth into large under-penetrated markets in the second half of 2023 and into 2024,” Sweeney wrote.

“Cash flow should accelerate the speeding up of deleveraging. Meanwhile, [BOOM’s] current valuation (4.9x 2023 EV/EBITDA) likely prices in economic concerns,” he said.

Sweeney said management has historically been very good allocators of capital, investing in technology and growth initiatives, especially during market downturns when other companies have been limited in their capacities. 

On its tech, Sweeney said DynaEnergetics has the best perforating technology available, with its IS2 detonating system generating a number of follow-on products. The analyst sees expansion in the segment driven by increased completion activity and price increases, where the segment’s 2022 total addressable market stood at about $1.0 billion.

Sweeney thinks DMC Global will generate full 2022 revenue and EBITDA of $639.5 million and $70.0 million, respectively, and 2023 revenue and EBITDA of $658.0 million and $93.7 million, respectively. The analyst sees DMC’s EPS going from negative $0.26 per share in 2021 to $0.42 in 2022 and onto $2.07 per share in 2023.