Opinions
The Panic-Proof Portfolio (Stockchase Research)
Source Energy Services Ltd
SHLE-T
TOP PICK
Sep 24, 2024
Stock price when the opinion was issued
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Premium contentWe reiterate SHLE, provider of frac sands as a TOP PICK. Last reported earnings confirmed a 136% increase in free cash flow and 31% expansion in margins, which was allowing for continued retirement of debt. It trades at 4x earnings, under book value, and a robust ROE of 168%. We continue to recommend a stop at $10.50, looking to achieve $15.50 -- upside potential of 19%. Yield 0%
(Analysts’ price target is $15.50)Premium contentPremium contentCanada's largest provider of frac sand. Demand for frac sand is quite high, especially with LNG coming on. Executing very well. Refinanced debt at lower rate, pushing it out to 2029. Easily an $18-20 stock in the next year. US and potential Canadian governments are much more pro-energy. No dividend.
(Analysts’ price target is $18.00)
Premium contentOur PAST TOP PICK with SHLE has triggered its stop at $13. To remain disciplined, we recommend covering the position at this time. When combined with our previous guidance, this will result in a net investment gain of 14%.
EPS was $1.74 for the Q1 and it is buying back stock as well. The stock is exceptionally cheap but that has not prevented a 29% YTD decline. The balance sheet is a bit levered but nothing too concerning. Insiders own 14% and have been net buyers in 2025. It's interesting, but very small and cyclical. We would not add until there is some stabilization in share price.
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The stock is exceptionally cheap at 4X earnings but that has not prevented a 13% YTD decline. The balance sheet is a bit levered but nothing too concerning. Insiders own 14% and have been net buyers in 2025. It's interesting, but very small and cyclical. Certainly at its valuation some other companies might be interested but we doubt management would be. EPS is expected to surge this year, and rise 10% in 2026. Still, it has a mixed history of volatile earnings, including losses. Its small size is a drawback, but the stock is picking up steam, up more than 100% since the market's April lows. We would consider it OK, mainly because of the very low valuation, offsetting its other risks.
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We reiterate SHLE, a frac sand distributor as a TOP PICK. The company recently announced a partnership with Trican Well Service to develop a world-class storage facility in NE BC, capable of receiving unit trains -- this should make it a key player in the development of this region. It trades at 4x earnings and under book value. We recommend trailing up the stop (from $9.50) to $10.50, looking to achieve $15.00 -- upside potential of 28%. Yield 0%
(Analysts’ price target is $18.50)