Monadelphous shares are up more than 20% in two days. Are they still a good buy?

Résumé détaillé

The company's first-half numbers are looking good. The post Monadelphous shares are up more than 20% in two days. Are they still a good buy? appeared first on The Motley Fool…

Monadelphous Group Ltd (ASX: MND) shares have led the gains on the ASX for the past two days following a strong business update which would see the company booking first half revenue up about 10% over last year.

The engineering and construction services company's shares have put on 23.3% over two trading days to be changing hands for $34.55.

Let's have a closer look at the trading update before I explain why the company still looks like a decent buy.

Monadelphous actually delivered two positive updates recently, with a 28 October announcement revealing that the company had been awarded a number of new contracts in the resources sector worth about $150 million.

These contracts, with Rio Tinto Ltd (ASX: RIO), BHP Group Ltd (ASX: BHP) and Whitehaven Coal Ltd (ASX: WHC) run for the next two to four years.

Then the company on 10 November said it had had a strong first four months of the financial year and gave guidance that first half revenue would come in at around $1.7 billion, up from $1.53 billion for the first half last year.

Monadelphous is expecting net profit to come in at $80-$85 million for the half, up from $64.8 million.

The main reason I believe the company still looks like a decent buy, is that its trailing price to earnings ratio is sitting at 22.56 based on the most recent numbers.

If the profit is going to step up substantially, it stands to reason that the shares need to rerate if that P/E ratio is to stay the same.

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