LBRT - Liberty Energy: Founder-Led Company At A Compelling Valuation

2024-02-12 11:02:54 ET

Summary

• Liberty Energy is a founder-led company. The founder not only has skin in the game, but also a compensation package that rewards value creation for shareholders.
• LBRT generated ROIC of 16% in 2023, creating value in as these returns are higher than its cost of capital. Additionally, a few hidden assets provide exposure to cool technology.
• A pristine balance sheet with 0.1x Net debt to EBITDA, and smart capital allocation decisions with a priority supports a bullish view on the equity.
• Compelling valuation at only 6.7x fwd. P/E and ~12% trailing free cash flow yield provides some margin of safety. Fair value estimate is in the $28-$31 range, offering over 40% return potential.

Liberty Energy Inc. ( LBRT ) is a founder-led company with a competitive service that should lead to cash flow and earnings growth. At only 6.7x fwd. P/E, LBRT is trading at quite an attractive valuation while executing value-add share buybacks. To make things better, it looks good on Seeking Alpha quant ranking with a buy rating and the company pays a dividend. With a respectable dividend yield of ~1%, I find LBRT to be a compelling investment opportunity.

This article explores why LBRT should merit consideration in an investment portfolio. The article will analyze the LBRT business model, balance sheet, ROIC (return on invested capital) profile, and other key factors that will drive an investment. The article will also review the risks involved in a potential investment in LBRT as well as provide an estimate of fair value for the company....

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