With its specialized equipment for oil and gas drilling rigs, this penny stock has established a unique niche in the industry,
A 2017 U.S. acquisition added to the company’s products and services and expanded its potential client base. While the company lost money in the most recent quarter, revenue rose and the order backlog reached a 3-year high. With productive research spending and a strong balance sheet, the company is well positioned to benefit when drilling activity rises.
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MCCOY GLOBAL INC. (symbol MCB on Toronto; www.mccoyglobal.com) designs and sells power tongs and other hydraulic gear for oil and gas drilling rigs. Power tongs are wrench-like tools that tighten and loosen the pipe in a drill hole.
They are used by land-based oilfield service companies and on offshore rigs. The company provides 12 hydraulic power tong models of varying size and weight. Recently it introduced a new power tong especially designed to meet enhanced requirements for land drilling in the U.S. In addition, McCoy provides sensors that help collect and measure data in harsh drilling environments.
Based in Edmonton, the company has operations in Canada, the United States, the U.K., Singapore and the United Arab Emirates.
With the slowdown in drilling activity over the last couple of years, especially in North America, McCoy undertook a number of cost-cutting measures. They included reducing its workforce, and consolidating and closing plants. The company announced that those initiatives were completed in the most recent quarter.
In 2017, McCoy also bought the assets of Texas-based 3PS Inc. for $6.1 million U.S. That firm specializes in sensors and torque and tension technology. 3PS lets the company diversify into more technology-based products and markets outside of oil and gas drilling.
Penny Stocks: Company now has its highest order backlog since 2015
In the quarter ended June 30, 2018, McCoy’s revenue rose 12.8%, to $10.4 million from $9.2 million a year earlier. Improving market conditions prompted customers to expand drilling and to increase equipment purchases.
The company cut its loss to $3.0 million, or $0.11 a share, in the latest quarter. That’s compared to a loss of $3.1 million, or $0.11 a share a year earlier. The latest quarter included one-time charges of $1.0 million, compared to $600,000 a year earlier.
Research and development spending rose to $877,000, a 25% increase from $704,000 a year earlier. However, research spending as a percentage of revenue was 9% compared to 12% a year earlier.
McCoy’s backlog now stands at $12.7 million—its highest since mid-2015. The company holds a high cash balance of $12.6 million, or $0.46 a share. It has no long-term debt and should profit as oil and gas activity further rebounds.
Recommendation in Stock Pickers Digest: McCoy Global is a buy for aggressive investors.
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