The Bingo Industries Ltd (ASX: BIN) share price is up 76% since February and around 11% in just the last week. Are investors onto something, or is it overvalued?

About Bingo Industries

Bingo Industries is a waste management business providing residential and commercial waste services, recycling services and bin manufacturing. It started in 2005 when the Tartak family purchased a small skip bin business.

Why The BIN Share Price Is Rising

The Bingo share price has been rising ever since the ACCC approved the acquisition of Dial-a-Dump Industries (DADI) back in February. Dial-a-Dump is a fully-integrated recycling and waste management services provider that operates in NSW. DADI handles many of the facets of the waste value chain, from collections to recycling, landfill and recycled product sales.

The main benefit of the acquisition was that it diversified Bingo’s business model away from some of the headwinds they were facing.

What Headwinds?

Much of Bingo’s business relies on construction and construction waste. So, with multi-dwelling residential construction (and many other areas of construction) on the decline, Bingo is exposed to the same headwinds that face the property and construction markets.

According to their latest market update, these headwinds have continued through 2H19 and are expected to continue through FY20.

The acquisition of DADI shifted Bingo’s post-collections and recycled revenue contribution from 47% to about 70% of group revenue, meaning the company is now diversified away from some of the risk.

While this is a positive move for the company, and it has clearly been well-received by investors, the headwinds are still present and could continue to impact profits, just to a lesser extent.

Future Strategy

Bingo’s focus now is to expand operations in Victoria and to enter the Queensland market, focusing on operational efficiencies to maintain a competitive advantage. It is likely that this expansion of the business will be one of the main growth drivers over the medium term, so investors should be looking for increasing market share and revenue.

Is it A Buy?

Despite the large share price appreciation over the last few months, today’s price is still roughly 11% below recent peaks, so it’s possible there could be a buying opportunity.

I think the main factors will be the success of the expansion into other states and whether or not construction begins to pick up.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.