Pason Systems Inc. (PSI-T)

In Q4, PSI missed EPS expectations of 29c coming in at 11c. Revenue beat expectations of $89.26M coming in at $93.93M but did decrease 1% year-over-year. Industry activity levels in North America, decreased by 19% year over year, while revenue per industry Day increased by 12% in that same period to $998, posting a new record quarterly level. The weaker results on a yearly basis reflects the inflationary effects on the Company's high fixed cost base for its drilling related business units, higher levels of lower margin sales from its solar and energy storage segment, and the inclusion of equity accounted losses related to supporting the rapid growth of Intelligent Wellhead Systems (IWS). Free Cash Flow increased significantly from $3.7M in year prior to $19.3M in the Q4 of 2023 with lower levels of working capital investments and capital expenditures year over year. PSI also increased its dividend 8% in the quarter. PSI continues to face industry related pressures related to lower levels of drilling activity which are hurting earnings and revenue but as these subside the company should perform better. The dividend increase was a good signal that PSI is still generating comfortable cash returns even while demand is slower. 
Unlock Premium - Try 5i Free

Expecting oilfield services demand to rise.
Record revenue and pricing power.
IoT tech for energy industry - very good product.
Record # of oil wells being drilling (since 2014).
Will continue to hold. 

A small-cap that supplies information to oil/gas-drillers. Shares tanked when drilling ceased during early Covid, but have rebounded. They hold $200 million cash in the balance sheet, which is how they survived. Drilling levels have returned to 2015 levels. They have endured. Earning are way up and commands strong market share in Canada with some in the U.S.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Strong year expected for PSI. Industry wide higher drilling activity expected. Strong improving margins and free cash flow. Dividend raised by 50%. Unlock Premium - Try 5i Free

A oil and gas service company with a $1.7 billion market cap. Payout ratio of 57%. With oil prices rising they could see cash flow grow by 16% in 2020. He will personally be looking to buy it on Monday. Yield 3.52% (Analysts’ price target is $24.90)

*Short* (Pairs trade with a Long on Trican Well Services (TCW-T)). This one is not a bad business, but the stock is much more expensive and is trading at twice the cash flow multiple that Trican does. There has been quite a bit of insider selling recently. All of a sudden, there is some very strong competitive pressure. Dividend yield of 3.5%. (Analysts’ price target is $21.50.)

(Top Pick Mar 18/16, Up 19%) An energy services company. They maintained the dividend and are seeing some move up in drills being used.

You generally see energy stocks leading a little in anticipation of higher oil prices. Then you see higher oil prices followed by energy services companies. Likes energy services companies, but not sure he would buy at this price. If it pulled back $1-$2, he would be pretty excited. His preferences would be Secure Energy (SES-T) and Canadian Energy Services (CEU-T).