Shares of mining services contractor, Monadelphous Group Limited (ASX: MND), soared as much as 13% this morning before falling back to trade around 4% up in early afternoon trade.
It's fair to say Monadelphous' shares have bucked the trend when it comes to the downturn in the resources sector.
Indeed, despite announcing a 30% drop to half-year profit in early February, the company's share price has climbed over 30% so far this year.
Source: Google Finance.
As can be seen in the graph above, Monadelphous shares have been at odds with the vast majority of mining services companies which have fallen heavily in 2015.
Macmahon Holdings Limited (ASX: MAH) and UGL Limited (ASX: UGL) have already fallen around 30% in 2015, whilst RCR Tomlinson Limited (ASX: RCR) is down 5% and Worleyparsons Limited (ASX: WOR) shares have moved marginally higher.
Is Monadelphous a diamond in the rough?
In January Monadelphous shares slumped to around $8 following a year-long selloff which saw almost 50% of market value wiped-out.
As fellow Motley Fool writer, Tim McArthur, wrote this morning, "Although it must be noted that a further decline in earnings is forecast for the 2016 financial year, arguably at levels sub $8 the stock was too cheap despite the difficult operating environment facing the mining services sector."
Indeed, depending on your risk tolerance, you may be inclined to try your hand your hand in the sector. However, I'm concerned many analysts covering the sector have been too bullish.
The next few years will likely see infrastructure and resources spending dry up to levels not seen for a long time. Meaning there'll be fewer contracts for mining services businesses to be awarded.
With no durable competitive advantage and a declining market spend, I'm giving riskier businesses like Monadelphous a wide berth.
