DUG Technology Ltd (ASX: DUG) has had an unremarkable year from a share price performance point of view, returning just 3% over the past 12 months.
But the team at Shaw and Partners is predicting bigger things for the company this year, and has a bullish price target on the shares, which I'll get to shortly.
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Shares fall on soft order book
The company's shares fell more than 20% when they released their FY26 results recently, despite the company delivering a solid set of figures.
The oilfield software and services company's revenue from customers came in at US$86.4 million, up 38% from the previous year, while net profit of US$2.6 million was up from a loss of US$4.4 million.
Commenting on the result, Managing Director Dr Matthew Lamont said:
FY26 was a record year for DUG. Revenue grew 38% and normalised EBITDA grew 78%, lifting our margin to 32% from 25%. We returned to profit and generated US$20.9 million of cash from operations. Earnings grew at twice the rate of revenue, which shows the operating leverage in this business. These results come from a long period of through-the-cycle investment rather than a single good year. Intellectual property is the centre of everything we do, and we now monetise it in four ways: services, software, HPC and multi-client. They are not separate businesses, they are different ways of selling the same core technology. We saw all of them perform extremely well during FY26 and we're excited about the future of each business.
Dr Lamont said the industry was busier than it had been in years, with high oil prices driving increase in exploration budgets.
He added:
That means exploration in harder places, where imaging quality decides whether a prospect is drillable, which is precisely the problem we built our technology to solve. We enter FY27 within an energised industry, with a large pipeline of opportunities, a contracted software and HPC base, and a growing multi-client library. We're excited for what lies ahead.
Broker says shares are looking oversold
Shaw and Partners noted that the company's forward order book of US$33.6 million was down 35% year on year, but said that management attributed this largely to timing.
They added:
Management stressed that unlike previous periods when a falling order book created concern, internally there is currently optimism, with projects remaining in the pipeline rather than being lost and significant acquired seismic data still to flow into processing.
Shaw and Partners has a price target of $3 per share on DUG, which is significantly above the current share price of $1.63. The company is valued at $223.7 million.
