I have owned DTL at various points over the years. I think it's a great company. With that being said, I cannot get past the valuation v where I think they are in the cycle. This is a more cyclical business than the market generally appreciates (hello 60c/share back in 2014) and I think a decent part of the last few year's business performance can be explained by very favourable business conditions.

Every metric seems to be saying peak cycle earnings. And yet the market is pricing this at almost 30x earnings. It's worth pointing out that the last down cycle took NPAT from $15m to $7.5m; ie it halved in the space of 3 years and PE ended up at 13x trough earnings (down at 60c). In the last down cycle they retained a lot of staff and carried them internally rather than letting them go, which I think explains some of ICR* surge between 2012 and 2014. I find the valuation here quite hard to justify unless I make some very generous assumptions around where revenue and earnings go over the next 3-5 years.

*I like Internal Cost ratio (ICR) for these guys as a quasi way of measuring asset utilisation given the people nature of the business the assets don't really show up on the balance sheet. That they bench staff rather than sack them during tougher times makes the ratio rather good at picking up general business conditions, imo.

A few charts to explain what I'm seeing.

Cheers