Value Investors: 1 Infrastructure Stock to Own for 10 Years

Badger Daylighting Ltd. (TSX:BAD) is North America’s largest provider of non-destructive excavating services.

| More on:
data analytics, chart and graph icons with female hands typing on laptop in background

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn moresdf

Badger Daylighting (TSX:BAD) is North America’s largest provider of non-destructive excavating services. Badger works for contractors and facility owners in a broad range of infrastructure industries. These market segments consist primarily of infrastructure projects in areas such as energy generation, electricity and natural gas transmission networks, roads and highways, telecommunications, water and sewage treatment, and general municipal infrastructure.

Customers in these segments typically operate near high concentrations of underground power, communication, water, gas and sewer lines, particularly in large urban centres, where safety and economic risks are high and therefore non-destructive excavation provides a safe alternative for certain customer excavation requirements.

Valuable technology

The company’s key technology is the Badger Hydrovac, which is used primarily for safe excavation around critical infrastructure and in congested underground conditions. The Badger Hydrovac uses a pressurized water stream to liquefy the soil cover, which is then removed with a powerful vacuum system and deposited into a storage tank.

Badger manufactures and designs the company’s truck-mounted hydrovac units, giving Badger the opportunity to incorporate feedback from hydrovac operators into the company’s existing and future design and manufacturing processes. Badger’s business model involves the provision of excavating services through two distinct business methods.

Expanding into new geographic areas

For the first method, Badger has established corporate-run operations, whereby it markets and delivers services in local areas directly. For the second method, Badger works with the company’s operating partners in specific geographic markets to provide Badger Hydrovac services to the end user. In this partnership, the company provides certain operational and training expertise, the Badger Hydrovacs, and North American marketing and administration support.

The operating partners deliver the service by operating the equipment and all work is invoiced by the company, with revenues shared with the operating partner based upon a revenue sharing formula. In the earlier phase of growth and development, Badger frequently used operating partners to expand the company’s business into new markets; as such, Badger’s operating partners were an important part of Badger’s operations. However, the company now largely pursues expansion into new geographic areas through the company’s own operations.

Diverse operating locations

Badger has a diverse and expansive network of operating locations throughout both Canada and the United States. The company services over 150 service locations or areas across both Canada and the U.S., with operations in six Canadian provinces and over 40 U.S. states. The extensive branch network is a key differentiator from the company’s competitors.

Competition in the hydrovac market typically consists of smaller hydrovac operators, which may service a specific location or a small operating area. Badger’s scope and scale of the company’s branch network is a key aspect of Badger’s business, providing the company with the ability to service customers across multiple regions while also providing the opportunity to optimize the company’s fleet.

The company has successfully demonstrated the merits of relocating Badger Hydrovacs during the downturn in the oil and gas markets throughout 2015 and 2016 in addition to Badger’s ability to provide large scale emergency response services to customers after natural disasters such as hurricanes or floods. Long-term shareholders of this stock should do well.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nikhil Kumar has no position in any of the stocks mentioned.

More on Investing

Investing

Pitch Braze Ad

This is my excerpt.

Read more »

Investing

KM Throwaway Post

Before Fool Braze Ad Mid-Article-Pitch The sun dipped low on the horizon, casting long, golden shadows across the quiet park.…

Read more »

Investing

Carlos Test Yoast Metadata

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut…

Read more »

Investing

KM Ad Test

This is my excerpt.

Read more »

Investing

Test post for affiliate partner mockups

Updated: 9/17/2024. This post was not sponsored. The views and opinions expressed in this review are purely those of the…

Read more »

Investing

Testing Ecap Error

Premium content from Motley Fool Stock Advisor We here at Motley Fool Stock Advisor believe investors should own at least…

Read more »

Investing

TSX Today: Testing the Ad for James

la la la dee dah.

Read more »

Lady holding remote control pointed towards a TV
Investing

2 Streaming Stocks to Buy Now and 1 to Run From

There are streaming stocks on the TSX that are worth paying attention to in 2023 and beyond.

Read more »