Investors in Mader Group Ltd (ASX: MAD) have had plenty to smile about over the past year.
Shares in the ASX mining services company have surged by 39% over the last twelve months, closing at $7.94 apiece on Friday.
For context, the All Ordinaries Index (ASX: XAO) has managed a modest 0.62% gain over the same period.
Despite this strong run, leading Australian investment bank Macquarie Group Ltd (ASX: MQG) believes there could be even more upside ahead.
Here's why the broker is still seeing blue skies for this ASX mining services business.
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Essential technical services provider
Mader is a mining services business with a simple business model focused on providing heavy equipment maintenance services to resource companies.
It was founded in 2005 by current Executive Chairman Luke Mader as a one-man Western Australian business.
Since then, it has expanded its operations to more than 540 locations across nine countries, boasting a workforce of over 3,900 staff who serve more than 490 customers.
Over the years, Mader has cemented its place as a leader in specialist technical services within Australia's globally renowned mining industry.
However, since 2019, it has been expanding into the North American mining and energy sectors.
It believes the market opportunity in North America could be more than twice the size of Australia.
Overall, Mader notched up a record $872 million in total revenue in FY25, with its 10-year compound annual growth rate (CAGR) for revenue reaching about 30%.
More specifically, the company generated 79% of its revenue from Australia and 19% from North America during the financial year.
Macquarie's viewpoint on Mader Group
Despite this strong multi-year performance, Macquarie believes the ASX mining services stock could have plenty of room for further growth.
The broker noted that Mader is still underpenetrated in Australia's core mining market, where ageing equipment continues to support maintenance activity.
It added that the company has fast-tracked efforts to replicate its success in adjacent markets such as infrastructure and road transport, as well as its expansion in North America.
As a result, it has forecast Mader's revenue CAGR through to FY28 to come in at about 15%, driven by anticipated commercial successes in the group's core and growth verticals.
Macquarie also believes that Mader boasts superior earnings per share (EPS) growth potential when compared to global and local peers.
Here, it has forecast an EPS CAGR of 17% through to FY28.
The broker also highlighted several other reasons for its positive outlook on the ASX mining services business.
It pointed to the company's strong balance sheet, its reduction in capital intensity, and the group's five-year average return on invested capital (ROIC) of about 25%.
All up, Macquarie placed an outperform rating on Mader shares with a 12-month price target of $10.40 per share.
This implies 31% upside potential from $7.94 per share at Friday's close.
