KLX Energy Services (KLXE), mcap=$74m, price $6.24 vs $5.05

$KLXE pitch:
– Highly levered oilfield service company.
– Extreem optionality on rapidly improving US onshore oil services activity and pricing.
– Stock could be 7x by 2023.
– Gradually growing revenues and EBITDA are expected to lead to organic deleveraging and positive FCF by 2023.
– Limited capex needs going forward, with half of EBITDA expected to transalte into FCF.
– Revenue is highly correlated to industry activity.
– The E&P industry underinvested since 2014 and now needs to catch up with the demand.

$KLXE valuation:
– Peers in pressure pumping and rig segments (such as $HP, $PTEN, $NBR, $LBRT, and $NEX) tend to trade at 3x-5x EBITDA multiples.
– At a similar multiple and assuming FCF is used to deleverage, KLXE would be $35 stock.

Exp. gain: 7x to $35/share by 2023.

Full KLXE write-up (free guest account required):

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