XES - Tetra Technologies: A Good Opportunity To Get On Board

2024-06-24 13:53:10 ET

Summary

• Tetra Technologies has grossly underperformed its peers over the past nine months, but we believe there could be some merit in looking at the shares now.
• A thrust towards automation, reduced G&A, a pickup in Water and Flowback services, and a transition to high-margin avenues bode well for the company's operational outlook.
• Given the medium-term EBITDA and EPS outlook on the cards, the forward valuations look incredibly cheap.
• After a difficult one-off, the traditional business is poised to generate over $40m of FCF this year.
• The risk-reward on the charts looks better now.

Introduction

In September 2023, we had written an initiation piece on Tetra Technologies, Inc. ( TTI ), a small-cap stock noted for providing various energy services and solutions across the globe (13+ countries). In our previous article, we had talked up some of the fundamental sub-plots of the TTI story, yet, we were not particularly keen to go long, as the risk-reward on the charts was not too appealing. Over the last nine months, the stock hasn’t fared particularly well, underperforming its peers from the oil and gas equipment service universe by over 7x!...

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