Credit Suisse Says Cactus Inc Has 26% Upside Potential

Cactus Inc WHD is a designer and manufacturer of wellheads, frac trees, manifolds, and production trees that are sold or rented to onshore oil and gas companies. Cactus is also the third wellhead company built by its CEO Scott Bender, which implies it's very well managed and should generate shareholder returns according to Credit Suisse.

The Analyst

Credit Suisse's James Wicklund initiated coverage of Cactus's stock with an Outperform rating and $31 price target.

The Thesis

Bender sold his first company to Cameron International in 1997 and his second company to GE Oil & Gas in 2011, Wicklund said in a note. His third company, Cactus was created the day his non-compete with GE Oil & Gas ended and became its own publicly traded entity in February.

Bender also managed to hire many of his former senior staff members and opened one manufacturing plant in Louisiana and another in China, the analyst said. Both facilities are "very tightly run and managed" with zero product quality issues so far. In fact, the company can offer both a lower-priced option from China if ordered in advance or an identical product made in the U.S. in a shorter time frame but with a slightly higher cost.

As such, Cactus is able to compete against its larger competitors as it offers customers the option to save money, Wicklund said. This helped the company boost its market share from 9 percent three years ago to 26 percent today.

For Bender's new company, it's a story of "been there, done that" and shareholders should expect an upside potential of 26 percent from current levels.

Price Action

Shares of Cactus were trading higher by nearly 1.5 at $25.01 percent Monday.

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