McCoy Global is a buy, Beacon Securities says

Beacon Securities analyst Russell Stanley launched coverage of McCoy Global (McCoy Global Stock Quote, Chart, News, Analysts, Financials TSX:MCB) on Aug. 18 with a “Buy” rating and a $5.50 price target, implying a potential return of about 72% including dividends.

“McCoy describes its strategy as two-pronged: accelerating market adoption for its smartProducts while returning excess cash to shareholders, primarily via buybacks and secondarily via the dividend,” Stanley said in his initiating note. “We view MCB as a compelling investment opportunity.”

Edmonton-based McCoy develops and sells equipment for tubular running services (TRS), the process of connecting steel pipe sections for oil and gas drilling. The company has offices in Canada, the U.S. and U.A.E.

While long known for traditional TRS tools, the company has in recent years shifted focus to its next-generation “smartProducts,” which integrate sensors and software to automate pipe-handling, cut down on labour requirements, and improve safety and data capture.

“The same boom-and-bust dynamic that has impeded sales of traditional or legacy products has helped create the opportunity McCoy is now monetizing,” Stanley said. “Years of relatively weak O&G activity encouraged skilled/experienced personnel to exit the industry, creating a critical labour shortage in a world where up to 50% of TRS cost is directly attributed to labour. This is driving increased demand for automation and improved safety. We estimate that McCoy’s smartProducts contributed 52% of TTM revenue.”

Stanley noted that McCoy has grown revenue per active rig even as global rig activity softened, contrasting with peers whose results tend to track rig counts more closely. In Q2, McCoy reported revenue of $24.1-million and Adjusted EBITDA of $4.8-million, a 20% margin. SmartProducts contributed 58% of sales, up from 32% a year earlier, with growth led by its smartCRT and smarTR offerings.

“(McCoy) is pursuing a two-pronged strategy: driving market adoption of its smartProducts, and returning cash to shareholders via its NCIB and secondarily through the dividend,” he said. “We believe this balanced use of cash flow bodes well for investors.”

Stanley also emphasized how the market is increasingly recognizing McCoy as more than just another oilfield services name.

“This is arguably the most crucial element of the story. A compelling product suite that is translating into revenue/EBITDA growth is great, but if the market were to paint (McCoy) as just another energy services company – a nice house in a bad neighbourhood, as the market often does for extended periods – the stock would suffer. Even following the recent pullback, McCoy investors have done very well, with the stock returning 63% year over year against the peer group average loss of 24%, with only one other company in the group avoiding losses over the last year.

“We believe the market ‘gets’ MCB to some extent, but that considerable upside remains.”

Looking ahead, Stanley forecasts McCoy will generate Adjusted EBITDA of $15.6-million on revenue of $80.3-million in fiscal 2025, improving to $23.5-million on $90.7-million in fiscal 2026.

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