US LNG exports surge but will buyers in China turn up?
On Tuesday, Raymond (NSE:RYMD) James analyst James Rollyson reaffirmed a Strong Buy rating for Natural Gas Services (NYSE:NGS), maintaining a $32.00 price target. The company’s stock has shown impressive momentum, gaining nearly 14% in the past week alone. Rollyson highlighted the company’s robust start to 2025, following a momentum-building 2024. He noted that the expected improvement in the latter half of the year is largely due to the timing of equipment deliveries. According to InvestingPro data, NGS maintains a "GOOD" financial health score, with analysts setting price targets ranging from $32 to $45 per share.
Natural Gas Services has achieved cycle high rental margins of approximately 62%, complementing its strong gross profit margin of 56.5% and impressive revenue growth of 22.6% over the last twelve months. The company’s adjusted EBITDA run-rate is on track to surpass the midpoint of guidance. This is particularly noteworthy as the bulk of new equipment deliveries for FY25 are anticipated in the second half of the year. Furthermore, the upper limit of the company’s revenue guidance has been increased by $1 million, now ranging from $74 to $79 million, with Rollyson suggesting that NGS is well-positioned to exceed these expectations. InvestingPro subscribers can access 5 additional key tips about NGS’s growth potential and financial strength.
Despite recent dips in oil prices, NGS has not experienced any significant change in customer demand. The analyst pointed out that strong gas demand growth should continue to necessitate increased compression horsepower. Additionally, operator budget reductions have been minimal to date. Trading at an EV/EBITDA multiple of 6.3x, the company’s valuation appears attractive relative to its growth prospects.
In April, NGS enhanced its financial flexibility by expanding its revolving credit facility from $300 million to $400 million under more favorable financial terms. This move positions the company to pursue further organic growth or potential mergers and acquisitions.
Rollyson’s commentary underscores Natural Gas Services’ strong market position, significant growth potential, and relatively attractive valuation, which support the firm’s decision to uphold a Strong Buy rating and a target price of $32 per share.
In other recent news, Natural Gas Services Group Inc reported its first-quarter 2025 earnings, surpassing expectations with an earnings per share (EPS) of $0.38 compared to the forecast of $0.26. Despite slightly missing revenue projections, the company reported total revenue of $41.4 million, just below the expected $42.48 million. The company achieved a 12% year-over-year revenue increase, largely driven by a 15% rise in rental income. Natural Gas Services also increased its adjusted EBITDA guidance to $79 million for the year, reflecting strong operational momentum. Additionally, the firm plans to invest in growth and maintenance capital expenditures, aiming for a 20% return on invested capital. On the analyst front, there were no specific upgrades or downgrades reported, but firms like Lake Street Capital Market and Raymond James participated in the earnings call. The company’s focus on technological innovation and market diversification has been highlighted as a contributing factor to its robust results.
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