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.
But a case could be made that the shares are still good value.
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Winning new contracts in the resources sector
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 explained:
The Company has experienced strong operating conditions throughout the first four months of the 2027 financial year. Activity levels have remained elevated across the business on the back of the substantial level of new contracts and contract extensions awarded over the last couple of years, with a further $830 million in new contracts secured since 1 July 2026. Demand for engineering construction services continues to be particularly strong, contributing a larger proportion of the Company's total revenue than in the first half of the previous financial year. Increased revenue from integrated construction projects and a full six-month contribution from Kerman Contracting are the primary drivers of the growth.
Monadelphous is expecting net profit to come in at $80 to $85 million for the half, up from $64.8 million.
Valuation looks undemanding
The main reason I believe the company still looks like a decent buy, is that its trailing price-to-earnings (P/E) 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.
The company has also been steadily increasing its dividends for the past three years, and with a strong net cash position and increasing profits, another increase could be on the cards.
Brokers also seem to like the shares, with The Australian reporting on 11 November that Bell Potter had upgraded its recommendation to a buy with a $36.50 price target.
Foolish takeaway
Monadelphous has been executing well over the past couple of years, and this recent announcement is more of the same.
The company's strong track record of growth and dividend payments makes it an attractive proposition.
