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On Wednesday, Mitcham Industries (NASDAQ:MIND) shares received an upgrade from Kansas City Capital, shifting from a Perform to an Outperform rating, with a new price target set at $6.00. The upgrade follows the company's successful conversion of preferred stock into common shares, a move that eliminated a significant preferred liquidation preference amounting to $49.6 million, including $7.6 million in undeclared cumulative dividends.
The analyst at Kansas City Capital expressed confidence in the value of Mitcham Industries' common stock, stating that it holds real value and is currently undervalued based on the company's recent financial performance and outlook. The assessment came after Mitcham Industries reported second-quarter fiscal year 2025 results, with revenue at $10 million, slightly below the $10.7 million estimate. However, a higher gross margin of 47.6% led to a gross profit of $4.8 million, closely aligned with projections.
Mitcham Industries achieved a pretax income of $1.5 million, surpassing the $1.4 million estimate, due to greater than expected operating savings. Earnings per share (EPS) were reported at $0.10, using the newly converted share count of approximately 8 million common shares. The company's EBITDA also exceeded expectations at $1.8 million, compared to the $1.7 million estimate.
The backlog for Seamap products, a segment of Mitcham Industries, showed a significant year-over-year increase, reaching $26.2 million as of July 31, 2024, up from $17 million on the same date in 2023. An additional $6 million in orders were either received or anticipated, which is expected to maintain the backlog at a stable level compared to the $31 million reported as of April 30, 2024. Management's optimism is fueled by a strong pipeline of potential orders from multiple industries and geographies.
In other recent news, MIND Technology reported a robust fiscal 2025 second quarter, showcasing significant year-over-year growth. The company's marine technology product revenues rose by 32% to $10 million, while gross profit escalated to $4.8 million. MIND Technology also noted a substantial improvement in its net income, which reached $798,000, a leap from a net loss in the previous year.
The company's recent developments include a solid backlog of about $26 million and over $6 million in new orders since July 31, 2024. MIND Technology also converted preferred stock to common stock, resulting in 6.6 million new shares, a strategic move to solidify the capital structure.
The company's outlook is positive for fiscal 2025, expecting to maintain profitability and positive adjusted EBITDA, driven by strong demand and a favorable market. MIND Technology is also exploring opportunities in artificial intelligence with Spectral software, which is receiving positive feedback from significant customers.
Despite the fact that artificial intelligence initiatives are not expected to generate substantial revenue immediately, the company sees even smaller contributions as meaningful.
InvestingPro Insights
Following the upgrade from Kansas City Capital, real-time data from InvestingPro provides a deeper view into Mitcham Industries' financial health and market performance. With a market capitalization of approximately $30.66 million, Mitcham Industries is navigating the financial waters with more cash than debt on its balance sheet, suggesting a solid liquidity position. This is further underscored by the fact that the company's liquid assets exceed its short-term obligations, as per InvestingPro Tips.
Despite not paying a dividend, which might be a consideration for income-focused investors, analysts are optimistic, predicting that the company will turn profitable this year. This forward-looking sentiment aligns with the positive outlook expressed by Kansas City Capital. On the earnings front, Mitcham Industries reported a gross profit margin of nearly 46% in the last twelve months as of Q1 2025, which is consistent with the higher gross margin highlighted in their recent financial performance.
For investors considering the stock's potential value, the current price is hovering around $3.77, with an InvestingPro Fair Value estimation of $4.07, suggesting a potential undervaluation. Interested parties can find more InvestingPro Tips, including a total of 7 tips for Mitcham Industries, which could provide additional insights for a more informed investment decision.
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