What is the market’s view of Oil States’ future operating performance as reflected in the current price of $5? Oil States’ common shares will need to reach $9 to achieve average annual stock market performance of 9.0% over the next 6 years. Upper quartile performance will require a $11 Oil States stock price by 2029.
Executive Summary
- Price Target Research identifies Oil States as having: high profitability, above average expected growth, instability, and below average financial strength. A big positive influence on Oil States’ valuation is its superior Profitability.
- Very low valuation, below market shareholder returns. Current valuation levels are very low relative to the Oil States Peer Group. Recent market returns have underperformed the Oil States Peer Group. Total shareholder returns expected to seriously beat the overall equity market. Based on current investor expectations, Oil States shares should reach a level of $11 by 2029 — an 12.7% per year total shareholder return. A 2029 stock price of $9 would reflect median performance and a price of $11 would be required to reach upper quartile performance.
- Oil States’ past growth is average. Historical growth has been average relative to the Oil States Peer Group and forecasted growth is relatively average. EPS Growth has lagged. This factor has negatively affected market perceptions of Oil States. Oil States’ historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity.
- Profitability has been Oil States’ biggest valuation strength. Return on Equity, Asset Turnover, and Pretax ROA are group leading. These factors have strengthened market perceptions of Oil States. The company has normal cash needs.
- Oil States’ risk profile is neutral. Overall variability has been very low with very low revenue variability, relatively low E.P.S. variability, and very high stock price volatility. Financial Strength is below average and earnings’ expectations are very low. The debt/capital ratio has declined.
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