Select Energy Services Q3 Earnings: Is NYSE:WTTR Cheap at 0.5x Price/Book?

in EARNINGS/INVESTING IDEAS by

Select Energy Services, Inc. (NYSE:WTTR) is scheduled to report Q3 earnings results after markets close for trading on November 3, 2020.

The company is expected to report earnings of -$0.25/share on revenue of $101 million. The consensus earnings per share (EPS) of -$0.25/share is based on a poll of 4 analysts and represents a decline in eps of −251.6% over the same quarter last year, when the company reported earnings of $0.16/share.

The revenue forecast of $101 million based on a poll of 4 analysts implies a year-over-year (YoY) decline in revenue of −69.3%. Last year the company reported $329 million in revenue for the quarter.

Expected to report EPS of -$0.25/share for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $100.98 $328.97 −69.3%
EPS -$0.25 $0.16 −251.6%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 7 tracked quarters of exceeding earnings guidance.

What are your expectations from Select Energy Services, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$0.32 -$0.32 0.5% Beat
Q1, 2020 -$0.06 $0.49 965.9% Beat
Q4, 2019 -$0 -$0.02 578.1% Beat
Q3, 2019 $0.11 $0.16 48.2% Beat
Q2, 2019 $0.16 $0.23 39.5% Beat
Q1, 2019 $0.12 $0.15 28.0% Beat
Q4, 2018 $0.18 $0.26 42.2% Beat
Q3, 2018 $0.30 $0.37 23.8% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 8.7%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 4, 2020 $4.61 $5.01 8.7% Increase
May 5, 2020 $4.29 $4.47 4.2% Increase
February 24, 2020 $7.26 $7.18 −1.1% Decline
November 6, 2019 $8.10 $8.01 −1.1% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −6.07, the model suggests that the company is not likely to be an earnings manipulator. A value of −6.07 implies a 0.0% chance of earnings manipulation.

Fundamentals And Technical Analysis

Select Energy Services, Inc. is currently trading at $2.98/share, down −5.1% for the day. The company is trading at approximately 31.5% of its 52-week high of $9.68/share. The company’s stock price is down −40.5% since the last earnings report and down −13.1% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 27.57 suggests the company is trading in technically oversold territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:WTTR Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −0.89 and a forward P/E multiple of −1.15.

Select Energy Services, Inc.’s current share price also implies a price-to-book (P/B) multiple of 0.49. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $2.98
P/E Ratio −0.9x
P/E Ratio (Fwd) −1.1x
PEG Ratio 0.0
Total Debt / Total Capital 15.4%
Levered Free Cash Flow $162.9 million
EV / EBITDA 3.6x

Finbox

Select Energy Services, Inc. is a micro-cap stock with a market capitalization of $272.8 million and a total enterprise value of $308.5 million. The company operates in the Energy sector and the Energy Equipment & Services industry.

Select Energy Services, Inc., an oilfield services company, provides water management and chemical solutions to the onshore oil and natural gas industry in the United States. The company operates through three segments: Water Services, Water Infrastructure, and Oilfield Chemicals. The Water Services segment provides water-related services, including water transfer, flow back and well testing, water containment, fluids hauling, water monitoring, and water network automation; technology solutions comprising hydrographic mapping, water volume and quality monitoring, remote pit and tank monitoring, leak detection, asset and fuel tracking, and automated-equipment services, as well as various on-site rental equipment and workforce accommodation services. The Water Infrastructure segment develops, builds, and operates semi-permanent and permanent infrastructure solutions to support oil and gas well development. The Oilfield Chemicals segment develops, manufactures, and provides a suite of chemicals used in hydraulic fracturing, stimulation, cementing, production, pipelines, and well completions, including polymer slurries, cross linkers, friction reducers, biocides, scale inhibitors, corrosion inhibitors, buffers, breakers, and other chemical technologies to pressure pumping, and integrated and independent oil and gas producers. This segment also offers production chemical solutions for underperforming wells in order to enhance well performance and reduce production costs; and ancillary oilfield services comprising corrosion and scale monitoring, chemical inventory management, well failure analysis, and lab services. Select Energy Services, Inc. was founded in 2016 and is headquartered in Houston, Texas.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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