How are energy investors positioned?
On Friday, Raymond (NSE:RYMD) James reaffirmed its confidence in Select Water Solutions, Inc. (NYSE:WTTR), maintaining a Strong Buy rating and a $19.00 price target for the company’s stock. The firm’s analyst highlighted the potential of Select’s Water Infrastructure business, despite the stock’s recent price fluctuations and a slower start to the year 2025. According to InvestingPro data, the stock has declined 23% year-to-date, though analyst consensus remains strongly bullish with price targets ranging from $16.50 to $19.00.
Select Water Solutions has experienced volatility in its share price, attributed to inconsistent performances in its oilfield services operations. However, the Raymond James analyst emphasized the underlying value of Select’s Water Infrastructure segment. According to the analyst, when evaluated independently, this division presents a compelling value proposition compared to its closest publicly traded competitor. InvestingPro analysis indicates the company maintains a healthy financial position with a GOOD overall health score and operates with a moderate debt level, supported by a strong current ratio of 1.65.
The analyst’s reiteration of the Strong Buy rating and the $19.00 price target comes in the wake of the stock’s recent weakness, which is believed to be related to a slow start in 2025 and potential macroeconomic disturbances. The valuation of $19.00 per share is primarily supported by the Water Infrastructure business, which, if assessed similarly to its main competitor, showcases the segment’s robustness. Based on InvestingPro’s Fair Value analysis, the stock appears slightly undervalued at current levels, trading at an EV/EBITDA multiple of 5.85x while maintaining consistent dividend growth of 16.67% over the past year.
In the detailed note provided by Raymond James, investors can find comprehensive valuation information supporting the price target. The analyst’s comments suggest that the Water Infrastructure business alone could justify the company’s valuation, presenting an opportunity for investors considering the current gap between the stock’s market price and its perceived value.
Select Water Solutions, Inc. continues to navigate through the challenges posed by its more traditional oilfield services while leveraging the growth of its Water Infrastructure business. The firm’s reiteration of its rating and price target reflects a belief in the company’s long-term potential and the strength of its specialized infrastructure division.
In other recent news, Select Energy Services Inc. reported its fourth-quarter earnings for 2024, revealing a slight miss in earnings per share (EPS) against market expectations. The company posted an EPS of -$0.02, falling short of the forecasted $0.11. However, revenue exceeded expectations, coming in at $349 million compared to the anticipated $339.97 million. Despite the EPS miss, the company announced a 17% increase in its quarterly dividend. Select Energy Services continues to focus on expanding its water infrastructure and recycling capabilities, achieving a gross margin of 53% in its Water Infrastructure segment. The firm also projects a 15-25% revenue growth in this segment for 2025. Additionally, Select Energy Services is making strategic investments, including a $62 million commitment in Colorado’s municipal, industrial, and agricultural water markets. These developments reflect the company’s ongoing efforts to strengthen its market position and explore new growth opportunities.
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