Mexco Energy: revenue accelerated to +22.2%, but the profit gain came from oil price, not volume

On 12 November Mexco Energy reported results for the second quarter of fiscal 2027 (July-September 2026): revenue of $2.119m (+22.2% YoY), EBITDA of $1.288m (+25.6%) and net profit of $0.444m (+37.2%). The EBITDA margin rose to 60.8% from 59.1% and the net margin to 21.0% from 18.6%, while the company kept a net cash position of $0.856m. Our verdict: rather attractive – EV/EBITDA of 4.5 is only 4% above its own three-year average of 4.3, so there is almost no cushion, but revenue growth and a 1.03% dividend yield support it. Our view: the share is rather attractive at the current price; no portal model for this share; EV/EBITDA 4.5 against a 3-year average of 4.3, in line with its history.

Our view: is there upside

Our view in numbers

Key takeaways

— Revenue accelerated to +22.2% from +9.3% a quarter earlier, the fastest pace in five quarters

— Profit rose 37.2%, but the driver was the oil price, not volume: oil production fell 7% over the half-year

— The EBITDA margin rose to 60.8% while operating profit barely moved at $0.573m

— A net cash position of $0.856m and net debt/EBITDA of minus 0.23 mean there is no debt burden

— Operating cash flow of $0.973m for the quarter does not cover $3.2m of royalty investment over the half-year

— A 1.03% dividend yield rests on accounting profit rather than on cash flow

— EV/EBITDA of 4.5 is 4% above its own three-year average of 4.3 – fairly valued, with almost no cushion

Key figures, USD bn

Revenue accelerated to +22.2% from +9.3% a quarter earlier, the fastest pace in five quarters

Revenue in the second quarter of fiscal 2027 was $2.119m against $1.735m a year earlier, up 22.2%. The prior quarter grew 9.3%, so the pace more than doubled. This is the best result since the quarter ended December 2024, when revenue was $1.891m.

The acceleration rests on price, not volume. In the press release the company states plainly: over the first half the average oil price rose 43%, the average gas price fell 23% and oil production declined 7%. Revenue for the six months still grew 21% to $4.102m, so the price factor outweighed lower production and gas prices.

For a holder this means the quarterly record is fragile: it rests on market conditions rather than on expanding output. The next report will show whether the oil price held at the level that produced this gain.

Profit rose 37.2%, but the driver was the oil price, not volume: oil production fell 7% over the half-year

Net profit for the quarter was $0.444m against $0.324m a year earlier, up 37.2%. That is faster than revenue because the margin widened: the net margin rose to 21.0% from 18.6%.

For the half-year profit was $0.945m against $0.565m, up 67%. The gap between the quarterly and half-year rates comes from a weak base at the start of the year: in the quarter ended December 2025 profit was only $0.050m. The half-year gain is larger than the quarterly one, and that reflects the earlier slump rather than a one-off.

The cause of the profit growth is the same oil price. The company discloses no one-off items, and profit grew with revenue while operating profit barely moved at $0.573m. The main contribution therefore came from price, not from cost cuts.

The EBITDA margin rose to 60.8% while operating profit barely moved at $0.573m

EBITDA for the quarter was $1.288m, up 25.6%, with a margin of 60.8% against 59.1% a year earlier. Operating profit barely moved: $0.573m against $0.363m, up 58%, but the absolute contribution is small.

The gap between EBITDA and operating profit – $0.715m – is depreciation. It absorbs more than half of EBITDA, typical for a company that buys royalties rather than drills wells. The 60.8% EBITDA margin looks high, but the operating margin is far more modest.

For valuation it is EBITDA that matters: the EV/EBITDA multiple of 4.5 is calculated from it. But a holder should remember that more than half of that figure goes to asset wear rather than staying as cash.

A net cash position of $0.856m and net debt/EBITDA of minus 0.23 mean there is no debt burden

As of 30 September 2026 the company has a net cash position of $0.856m: cash exceeds debt. Net debt/EBITDA over the trailing twelve months is minus 0.23, meaning debt is negative.

This is a level, not a trend: the facts contain no earlier value for the ratio, so one cannot claim leverage rose or fell. One can only say there is no debt and no interest burden on profit.

For a company this small that is a real advantage: it can fund royalty purchases without external debt. But the $0.856m cash cushion is small against the $3.2m of investment over the half-year that the company's president mentions.

Operating cash flow of $0.973m for the quarter does not cover $3.2m of royalty investment over the half-year

Operating cash flow for the quarter was $0.973m, below EBITDA of $1.288m. The gap is working capital and taxes, but the flow remains positive and covers profit.

Investment matters more: over the first half the company put $3.2m into acquiring royalty interests, according to president Tammy McComic. That exceeds operating cash flow for the two quarters ($0.973m plus $1.5m in the prior quarter, $2.473m in total). The asset purchases were therefore funded from accumulated cash.

Separately, the company plans to participate in drilling 55 horizontal wells and completing 20 wells at an aggregate cost of about $1.8m for the fiscal year, of which $0.9m has already been spent. That is another outflow that will weigh on free cash flow.

A 1.03% dividend yield rests on accounting profit rather than on cash flow

The trailing twelve-month dividend yield is 1.03%. The company pays dividends, but the amount is modest: with trailing twelve-month profit of $1.7m and a market cap of $19.7m, the payout is about $0.2m a year.

Our estimate for the current year is a payout close to last year's, provided profit stays positive. The payout rests on accounting profit rather than free cash flow: $3.2m of royalty investment over the half-year exceeds operating cash flow, so the dividend is funded from reserves.

A 1.03% yield is below the key rate and does not compensate for risk. A further increase in royalty investment or a fall in the oil price that hits profit could reduce the payout. For a holder the dividend is a nice extra, not a reason to buy the stock.

EV/EBITDA of 4.5 is 4% above its own three-year average of 4.3 – fairly valued, with almost no cushion

The trailing twelve-month EV/EBITDA multiple is 4.5 against its own three-year average of 4.3. The gap is +4%, so the stock trades in line with its history rather than at a discount.

The trailing twelve-month P/E is 11.7, which with profit of $1.7m and a market cap of $19.7m gives an earnings yield of about 8.5%. That is above the dividend yield but below the key rate.

Fair valuation means further gains can come only from earnings growth, not from a re-rating of the multiple. With revenue accelerating to +22.2% that is possible, but fragile: everything rests on the oil price.

Valuation on the latest reported figures

Bottom line

The strong side of the report is revenue accelerating to +22.2% and the EBITDA margin rising to 60.8% with a net cash position of $0.856m. The weak side is the nature of that growth: it rests on the oil price while production falls, royalty investment exceeds operating cash flow, and a 1.03% dividend yield does not compensate for risk. Valuation is fair: EV/EBITDA of 4.5 is 4% above its own three-year average of 4.3, leaving almost no cushion. Our verdict: rather attractive – EV/EBITDA of 4.5 is only 4% above the three-year average of 4.3, so there is almost no cushion, but revenue growth and a 1.03% dividend yield support it. Our view: the share is rather attractive at the current price; no portal model for this share; EV/EBITDA 4.5 against a 3-year average of 4.3, in line with its history.