Select Energy Services Is Trading At Meaningful Discount To Water Oriented Peers, Marking Attractive Entry Point, Says Analyst

  • Raymond James analyst James M.Rollyson initiated coverage on water management solutions provider Select Energy Services Inc WTTR with a Strong Buy rating and a price target of $12.
  • Select has nearly 3.0 MMBpd of water recycling capacity, nearly 2.7 MMBpd of disposal capacity, more than 1,500 miles of underground pipeline, and other associated equipment/facilities to support its business.
  • The analyst noted that the company's strong position as a leader in water sourcing, transfer, disposal, and especially recycling positions it well under the growing water needs of the oil patch.
  • That, coupled with its unique position in the chemicals business, recent organic and M&A-fueled growth, and sharp share price pullback, has driven the analyst to initiate with a Strong Buy rating.
  • Select's outlook for revenue and EBITDA growth leads sits atop its peers according to consensus estimates, noted the analyst. 
  • The analyst mentioned that WTTR is trading at a meaningful discount to its historical range and the "water" oriented peers.
  • The free cash flow outlook provides the ability to return additional cash to shareholders, as evidenced by the $50 million repurchase program announcement yesterday.
  • The analyst said that recent attractively priced M&A transactions drive future growth, and the recent Breakwater deal comes with pre-permitted organic growth opportunities in the Permian.
  • Price Action: WTTR shares are trading higher by 6.17% at $6.37 on the last check Thursday.


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