Williams Industrial Services Group (WLMS) — our latest "stock of the month" — provides construction, maintenance and support services to energy, power and industrial end markets in North America, explains Faris Sleem, editor of The Bowser Report.
The company offers maintenance, modification, repair and other capital project services to extend life cycles of nuclear, fossil fuel, industrial gas, hydropower, natural gas, municipal water and wastewater and other facilities.
Williams Industrial has made tremendous progress in restructuring the company. There have been major changes to leadership and its non-core operations have been sold and closed over the past two years. The new leadership is focused on realigning core business operations and driving growth.
U.S. nuclear outlook is strong. Two new reactors — Vogtle Unites 3 and 4 — are under construction in Georgia and are expected to come online between 2021 and 2022. The Canadian nuclear outlook is also positive due to projects at both Bruce Power and Ontario Power Generation.
The Fuel Storage/Decommissioning outlook is also positive because of significant projects moving forward at multiple sites. Lastly, WLMS is expanding its wastewater businesss to Florida to add new customers. Market dynamics for industrials are favorable due to national water infrastructure needs.
Williams Industrial has set the stage for long-term growth by building a solid fundamental foundation. A rights offering from March 2020 allows greater financial flexibility to support new business development initiatives. The oversubscribed rights offering brought net proceeds of $6.6 million.
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WLMS's balance sheet is healthy despite $32.5 million in long-term debt due to cash flow generation and net operating losses offsetting taxes. Book value and market value have increased over the past year. The stock sold off for two months after the rights offering but is back up to its 52-week high.
The jump in market value makes the stock overvalued relative to its book value, but still undervalued relative to the industry. The Price/Sales (P/S) ratio of 0.23 is 83% lower than the sector average of 1.5. Overall, the company is undervalued and its bullish trend in book value is reassuring.
At a glance, long-term debt seems like a red flag, but it is necessary for the company to fund business developments. Moving forward, we expect the stock to uplist to the Nasdaq and continue to create value for shareholders.
