Now down 46%, this FTSE small-cap stock looks a steal to me at 463p

The FTSE AIM 100 index is 46% lower than it was in September 2021, meaning many small-caps remain in the doldrums. Undoubtedly though, there will be lucrative opportunities in this space for long-term investors.

A potential one that stands out to me is Ashtead Technology (LSE: AT.). Now at 463p, the share price is down 46% inside a year.

Here’s why I think this AIM-listed stock now looks like a bargain to consider.

Impressive growth

Ashtead Technology is a leading subsea solutions provider to the global offshore energy sector. It rents out specialist equipment, including robots and mechanical solutions to enable the construction, inspection, maintenance, repair and decommissioning of offshore projects. Its equipment fleet now total more than 30,000 assets.

The £373m company is a serial acquirer, snapping up smaller firms to build out its specialist offerings. Growth has been very impressive, with profits more than quadrupling over the past five years.

Last year, revenue surged 52% to a record £168m through a combination of organic growth and strategic acquisitions. Adjusted EBITA increased 39% to just over £50m.

In November, it carried out its largest acquisition to date (Seatronics and J2 Subsea, acquired from the same company). And despite what the weak share price might suggest, brokers have 35% top-line growth pencilled in for 2025.

Volatile backdrop

Given this strong growth, why on earth are Ashtead Technology shares down in the dumps recently?

Well, the company’s equipment spans both the oil and gas and renewables sectors, with a strong presence in the North Sea. But UK oil and gas companies operating in the North Sea have been under pressure from regulatory uncertainties, project delays, and massive taxes.

In offshore wind, several major European projects have been scaled back or cancelled due to rising costs. And there’s a growing backlash against net-zero policies in parts of Europe, so perhaps this is an overhang, as renewables is a key growth market for Ashtead Technology.

Meanwhile, a global recession is a risk because some offshore energy projects might get delayed or canned. It seems like the stock has been dragged down by all this, despite the firm recently saying that Q1 trading had been encouraging.

Global operations

If we look at the geographic mix, some 68% of revenue last year came from Europe. However, this is slightly misleading because reported revenue is from the location that the work is mobilised from. It’s not where the work takes place. That might actually be in West Africa, Brazil, or the Gulf of Mexico.

In other words, Ashtead Technology is more of a global company than it might seem at first glance. And 85% of its equipment is interchangeable between oil and gas and renewables, providing flexibility.

For example, the current UK government is pro-offshore wind, but not a fan of oil and gas. In the US and elsewhere, it’s the exact opposite. As the firm’s CEO said in March: “We’re highly flexible. We’re not tied to any one geography or end market.”

Attractive valuation

The stock is trading at 10 times adjusted earnings forecast for 2025, falling to 8.7 in 2026. The price-to-earnings-to-growth (PEG) ratio is 0.5 (any growth stock below 1 is often worth investigating).

Given the strong long-term growth prospects and low valuation, I’m going to buy more shares soon.

The post Now down 46%, this FTSE small-cap stock looks a steal to me at 463p appeared first on The Motley Fool UK.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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Ben McPoland has positions in Ashtead Technology Plc. The Motley Fool UK has recommended Ashtead Technology Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.