Too Late To Catch FloTek's Big Run?

| About: Flotek Industries, (FTK)

Flotek (NYSE:FTK) has had an incredible run over the last year, up about 280%. About 5 years ago the low level for the stock was about $0.27 - just recently the stock split 2-1 after hitting an all time high of $67 (pre-split).

Some company info:

Flotek Industries, Inc. (Flotek) is a global supplier of drilling and production related products and services to the energy and mining industries. Its core focus is oilfield specialty chemicals and logistics, downhole drilling tools and downhole production tools. Flotek offers its products primarily through its sales organizations, as well as through independent distributors and agents. There are three segments that are considered business units offering various products and services. First is the Chemicals and Logistics segment, which offers specialty chemicals for drilling and cementing. Another is the Drilling Products segment, which rents, inspects, manufactures and markets down hole drilling equipment for the oilfield, mining, water-well and industrial drilling sectors. Last is the Artificial Lift segment, which provides pumping system components, gas separators, production valves and services.

So is it too late for FTK newcomers?

Well let's take a look at the company's earnings:

They almost doubled first quarter earnings, with .38 vs .20 in the year ago period.

EPS estimates adjusted for the split vs. last year's numbers:

2nd Qtr - .23 vs .13
3rd Qtr - .31 vs .11
4th Qtr - .38 vs .15

Revenue estimates:

170.2 million this year vs 100.6 last year

PE - 41.77
PE on this year's numbers - 27
Forward PE - 16.6

Growth rate estimates over the next year:

EPS - 61%
Rev - 66%

As you can see, the estimates for growth are very high for this company. The stock having come such a long way makes it a candidate to see a brutal sell off should expectations not be met.

On the other hand, if they do continue their rapid growth helped by their acquisition strategy and patented product pricing power, the stock could still have a long way to run. A conservative 30x next year 's numbers give you a stock price at $53.70 and a PEG of only .9.

If their organic growth can continue at plus 30% (last qtr's was plus 50%) there is no reason the stock couldn't double from these levels.

Risk factors include the prices of oil and gas - even if the company executes, the prices of these commodities usually affect the stocks of all companies tied into the industry. If prices see rapid decline, FloTek's future revenue expectations will decline along with them.

Weather such as hurricanes could negatively affect sales and competition from bigger companies with a lot more funding will always be an issue. Another issue is that the biggest part of their business - Chemicals - is really tied to 1 product used in microemulsion. While they have broken up the product into a few different variations, it is still a large part of what makes FTK tick. The company believes that their chemical business has the potential to be a $500 million a year revenue generator.

The stock has also not gone unnoticed, appearing in the IBD 100 which can also affect a company's stock price short term depending on its placement (FTK is currently number 2)

Right now seems to be as good as ever for FloTek, with high oil, an exploding business and successful acquisitions. With the strong start to the year in what is their slowest quarter they look poised to continue crushing the ball this year with everything that's already in place.

They will most likely need to continue with some acquisitions going into next year and expanding their business beyond the key chemical components. To me the stock still does not appear to be overvalued and with their next earnings report coming up August 2nd, I will be looking for a little dip to start a small position before earnings and we'll see how things go after that.

Disclosure: Author is long FTK