Solaris Oilfield Infra (SOI) Valuation Update - May 18
Posted: Thu May 18, 2023 10:00 am
I have updated my forecast/valuation model for SOI and posted it to the EPG website.
At the time of this post SOI was trading at $7.71. My valuation increases by $0.25 to $15.75.
> SOI is a very profitable and very simple company.
> They did not reduce their quarterly dividend during the pandemic and they recently raised the dividend to $0.11/qtr.
> They are aggressively buying back shares. Lower number of outstanding shares = higher net income per share. < Primary increase for my increased valuation is the declining number of shares outstanding.
> Like most oilfield services companies, the Company's gross profit margin is increasing and I expect that to continue in 2H 2023.
> This year's capital expenditures are front end loaded, so they should have more free cash flow in 2H 2023 and in 2024.
> Per my forecast, net income per share should increase in 2023 to $1.00, up from $0.67 in 2022.
> Operating cash flow per share should increase in 2023 to $3.22, up from $2.54.
There is NOTHING to justify this stock trading at less than 3X operating CFPS.
At the time of this post SOI was trading at $7.71. My valuation increases by $0.25 to $15.75.
> SOI is a very profitable and very simple company.
> They did not reduce their quarterly dividend during the pandemic and they recently raised the dividend to $0.11/qtr.
> They are aggressively buying back shares. Lower number of outstanding shares = higher net income per share. < Primary increase for my increased valuation is the declining number of shares outstanding.
> Like most oilfield services companies, the Company's gross profit margin is increasing and I expect that to continue in 2H 2023.
> This year's capital expenditures are front end loaded, so they should have more free cash flow in 2H 2023 and in 2024.
> Per my forecast, net income per share should increase in 2023 to $1.00, up from $0.67 in 2022.
> Operating cash flow per share should increase in 2023 to $3.22, up from $2.54.
There is NOTHING to justify this stock trading at less than 3X operating CFPS.