SDPI - DTI Has Better Margins And Lower Valuation Than Its Peers
2024-05-15 10:33:22 ET
Summary
- Drilling Tools International went public last year to take advantage of the consolidation trend in the drilling industry and increase its market share.
- More than 50% of DTI shares are owned by Hicks Private Equity, with management holding more than 10% of shares outstanding.
- DTI has shown better margins and return on invested capital compared to its peers while having a lower valuation.
- However, there is limited data to evaluate DTI’s M&A strategy as a public company and its impact on shareholder returns.
Investment Thesis
Drilling Tools International ( DTI ) aims to grow by following buy-and-build strategy. The business has better margins compared to its peers, higher return on invested capital, and lower valuation. Besides, DTI is leading by an experienced management with sizeable ownership in the company. These are why I recommend "Buy" rating to DTI.
Background
DTI was established around 40 years ago in Texas. It was acquired by Hicks Equity Partners in 2012 and went public just around a year ago through a SPAC. Hicks Equity still owns more than 50% of DTI shares....
DTI Has Better Margins And Lower Valuation Than Its Peers