Opinions
Eric Nuttall
STEP Energy Services
STEP-T
PAST TOP PICK
Dec 14, 2018
Stock price when the opinion was issued
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He thinks it is pretty cheap right now. The company made an acquisition in Oklahoma giving them more fracing assets, which he likes. Investors are a little concerned about infrastructure capacity constraints in the Permian. He has a 12 month target price of $15 and is looking for an entry in this soon.
This coil tubing and pressure pumping company with assets in the US has exposure in the Permian, which is temporarily slowing as infrastructure becomes constrained. In Canada, the market remains even weaker for service companies and there are rumours one of the big players is offering service rates at a 30% discount. The challenge for STEP-T it that their margins may be under pressure. He would not own this name right now.
(A Top Pick January 5/18 Down 63%) Ownership is very thin in this company and this has hurt the valuation dramatically and has gone no bid at times – falling 5% in value a day. They were very predatory in trying to win business and he has since lost faith in their strategy. He will no longer own this going forward.
STEP is down 35% this year, but up 59% in 52-weeks.
Profit taking is probably part of the issue here. It did beat estimates in the 4Q, but the sector has been quite weak, and the company has recently seen two downgrades by brokers.
EPS is supposed to show very little growth in 2023 before recovering somewhat in 2024.
The drop does seem a bit much based on recent results and considering the very low valuation.