PE ratios are relatively useful in steady-state companies where...

PE ratios are relatively useful in steady-state companies where the recent past years EPS are not much different to what can be expected in the next few years. NWH is in recovery mode, so it is not what one could regard as being in a steady state. What also counts is the level of CAPEX that is normally required to keep the company expanding at the rate one expects it to expand. NWH is enjoying a CAPEX hiatus due to its fleet having being underutilised in recent years, but there will come a time when new equipment would be required,which would take some of the gilt off the gingerbread.

MND is a different beast to NWH – it throws off more free cash, and hence can hold a relatively high dividend-payout ratio than NWH can. Other things being equal, MND should, consequently, have a higher PE ratio than NWH. The average PE ratio is about 15, and normally NWH would be below that, and MND above that. I seem to recall that NWH's PER used to hover around 10 and MND's at about 18. What makes things look good for NWH is that it is moving up the grunt-boffin ladder to become something more than a earth-moving company, so its normal PER may move closer to the average 15.

If you accept EPS is going to be 13.5c in FY18, and better than that in the years that follow, you might use a PER of say 12, and get a target price of circa 12 x 13.5c = $1.62. As the EPS improves in future, that in itself will tend to increase the PER, so the valuation improves on two fronts. For example, if EPS in 2019 is expected to be 16c, the PER may move to say 14, and that suggests an SP of 14 x 16c = $2.24. This is a bit too bullish for now, so I'll stick to my long-held target of $2.00 this calendar year, although I would not die in a ditch defending that guesstimate.