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Stone Fox Capital Advisors is a registered investment advisor founded in 2010. The firm offers portfolio management with a focus on opportunistic stocks providing secular growth trends at an affordable value. An emphasis is placed on fundamental analysis though charts are used for timing entry... More
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  • C&J Energy Services Reports 336% Growth  0 comments
    Sep 1, 2011 2:59 PM | about stocks: CJES
    If anybody wants a growth company trading at a cheap valuation, recent IPO C&J Energy Services (CJES) might just be the stock for you. CJES is a independent provider of hydraulic fracturing, coiled tubing and pressure pumping services operating mainly in the Eagle Ford and Haynesville Shales. The company IPO'd at the end July and has traded down from the $29.50 IPO price even with initial trading reaching $33.

    CJES reported Q2 adjusted earnings of $.78 versus $.60 in Q1 and $.04 last year. Revenue jumped 43% from Q1 to $182.2M and a amazing 336% from Q210. The majority of growth is from deploying additional hydraulic fracturing fleets with minor gains from the Total E&S acquisition that added $4.5M in revenue or roughly $2.2M per month.

    Earnings should continue to grow with expanded fleets, but Q3 will see a higher share count from the IPO. It was unclear from information provided exactly what the impact will be in Q3. The Q2 report showed 44M shares outstanding though the prospectus has 53M prior to the IPO and nearly 58M after. The difference is unexplained at this point.

    Future growth plans include adding new fracturing fleets and coiled tubing units as follows:

    • Fleet 5 - started working Aug 1st
    • Fleet 6 - delivery Q411
    • Fleet 7 - delivery 1H12
    • Fleet 8 - delivery 2H12
    • Fleet 9 - possible by end of 2012
    • Coiled Tubing units - 3 more by year end
     

    The Conference Call was generally bullish with limited analysts questions suggesting that the company is very underfollowed. Especially considering the high demand for the services it provides. The biggest news was probably that it has the ability to add Fleet 9 by the end of 2012 if demand continues strong. Pricing remains strong and stable. Though capacity has been added to the industry, wells awaiting facturing have increased from 2,500 to nearly 4,000.

    The acquisition of Total gives them the ability to add equipment quicker and cheaper. This could be a huge advantage if demand continues to soar.  Not to mention that the equipment can currently be added mainly from cash flow with adjusted EBITDA of $65.8M in Q2. Fleet 6 only costs $33M and net income should only grow from the roughly $38M profits.

    The Bakken provides a future growth prospect and well does the Marcellus I would imagine. For now though, the company has plenty of work in the Eagle Ford and Haynesville with spot work in the Granite Wash and the Permian Basin. Logically its more profitable to remain in the general Texas location if business remains strong. As long as the customer base remains diversified the company should be fine if one of the shales were too dry up.

    All in all, this is one of the best growth stories the market has seen in a while. Not to mention, its one of the best valuations as well. Typically IPOs like a LinkedIn (LNKD) and SodaStream (SODA) that has similar growth are met with outrageous valuations.

    Take a look before the market catches on!

    Themes: IPO, Oil Services Stocks: CJES
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