On Monday, Piper Sandler adjusted its outlook on Oil States International (NYSE:NYSE:OIS), a provider of services to oil and gas companies, by reducing its price target on the company’s stock. The new price target is set at $7.50, marking a decrease from the previous figure of $8.00, while the firm maintains a Neutral stance on the shares.
The adjustment by Piper Sandler comes after a detailed evaluation of Oil States International’s financial projections and market position. The price target revision is based on a slightly lower multiple of expected value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) for the year 2025. The firm now applies a 5.8 times multiple, down from 6 times, to the anticipated $98 million EBITDA. This valuation also takes into account the company’s net debt, which stood at $112 million at the end of the first quarter of 2024, and its 63 million fully diluted shares.
Piper Sandler’s analysis included a “sum of the parts” valuation approach, which assesses the value of each segment of the company’s operations individually, as opposed to a consolidated valuation that would consider the company as a single entity. This method allows for a more granular view of the company’s worth based on the discrete performance of its various divisions.
The firm also identified several risks that could impact Oil States International’s performance. These risks include the volatility of the oil market, potential capital restraint by exploration and production (E&P) companies, and the existing overcapacity and fragmentation within the oilfield services (OFS) sector. These factors could pose challenges to the company’s financial health and stock performance.
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In light of the recent analysis by Piper Sandler, it’s worth noting that Oil States International (NYSE:OIS) has exhibited significant volatility in its stock price, aligning with the firm’s assessment of market risks. According to InvestingPro data, the company’s stock price has experienced a steep one-month total return of -32.92% and a six-month total return of -42.78%, underscoring the challenges highlighted by Piper Sandler. Despite this, Oil States International’s liquid assets surpass its short-term obligations, providing some financial stability in turbulent times.
While the company has not been profitable over the last twelve months, analysts on InvestingPro predict that Oil States International will turn a profit this year. This forward-looking optimism is a key consideration for investors weighing the company’s potential for recovery. Additionally, the company’s current market capitalization stands at $277.41M, with a price-to-book ratio in the last twelve months as of Q1 2024 at 0.4, indicating that the stock might be undervalued relative to its assets.
For investors seeking more comprehensive analysis, InvestingPro offers additional insights and metrics on Oil States International. There are currently 6 more InvestingPro Tips available which could provide further guidance on the stock’s performance and potential investment strategies. For those interested in accessing these tips, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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