Maca Ltd profit jumps 12%: Should you buy?

What: Mining services provider Maca Ltd (ASX: MLD) was always expected to buck the trend of its peers and report an increase in profits for the 2014 financial year.

It hasn’t disappointed with the firm yesterday announcing a 25% increase in revenue to $595.4 million and a 12% increase in net profit after tax to $55.4 million. On a per share basis, earnings amounted to 30.3 cents and for the full year fully franked ordinary dividends of 14 cents per share have been paid and declared.

So what: Achieving an increased profit when faced with such difficult industry headwinds is a commendable effort by Maca’s management and is a key reason Maca has been one of the top picks of some fund managers recently.

Now what: Despite profits coming in above the expectations of many analysts, the share price hardly budged after the results release. Based on the FY 2014 numbers, the stock is currently trading on a price-to-earnings ratio and dividend yield of 7.1x and 6.5% respectively. The company also boasts a net cash position of $6.8 million which adds to the positive attributes of this stock. In short Maca ticks a number of boxes for a value investor and could be one for the watchlist.

However, management provided FY 2015 guidance for revenue of over $600 million which could suggest limited growth ahead for the firm, so, while Maca does appear cheap, it may struggle to be re-rated if it cannot produce a reasonable rate of revenue growth.

In contrast, The Motley Fool has issued a firm "BUY" rating on this small but ultra promising ASX company - it has plenty of growth ahead of it... and you can get the name and code FREE right now. Click here for your free copy of "The Motley Fool's Top Stock for 2014."

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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