How Do We Tell if RPC (RES) Is Undervalued?

RPC may be undervalued with strong growth indicators, but the 5 analysts following the company give it an rating of hold. Their target prices range from $8.0 to $13.0 per share, for an average of $10.25. At today's price of $7.37, RPC is trading -28.1% away from its average target price, suggesting there is an analyst consensus of strong upside potential for the stock.

RPC, Inc., through its subsidiaries, provides a range of oilfield services and equipment for the oil and gas companies involved in the exploration, production, and development of oil and gas properties. Based in Atlanta, GA, the small-cap Energy company has 2,732 full time employees. RPC has provided a 1.0% dividend yield over the last 12 months.

RPC has a trailing twelve month P/E ratio of 5.8, compared to an average of 7.54 for the Energy sector. Considering its EPS guidance of $1.39, the company has a forward P/E ratio of 5.3.

The average compound growth rate of the company's historical and projected earnings per share is 34.4%. On this basis, the company's PEG ratio is 0.17. However, this growth rate is probably not sustainable. In its place we will use the broader market's estimated 5-year EPS growth rate of 11.0%, which gives us a PEG ratio of 0.53. Even with this more conservative assumption on EPS growth, the PEG ratio suggests that RPC shares are underpriced.

The market is placing a reasonable value on RPC's book value, since its P/B ratio of 1.69 is comparable to its sector average of 1.68. The company's shares are currently -34.0% below their Graham number, indicating that its shares have a margin of safety.

If analysts are giving the stock a bad rating, it's likely that they are looking beyond simple valaution metrics and attempting to forecast the company's growth potential. For example, RPC has narrow margins as you can see in the financial summary below.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $1,222 $598 $865 $1,602
Gross Margins 10.8% 3.7% 14.9% 26.9%
Operating Margins -2.9% -17.0% 0.6% 17.4%
Net Margins -7.13% -35.47% 0.83% 13.63%
Net Income (MM) -$87 -$212 $7 $218
Net Interest Expense (MM) 2 0 -2 1
Net Interest Expense (MM) $2 $0 -$2 $1
Depreciation & Amort. (MM) -$170 -$96 -$73 -$84
Earnings Per Share -$0.41 -$1.0 $0.03 $1.27
EPS Growth n/a -143.9% 103.0% 4133.33%
Diluted Shares (MM) 212 212 213 216
Free Cash Flow (MM) -$41 $13 -$20 $62
Capital Expenditures (MM) -$251 -$65 -$68 -$140
Net Current Assets (MM) $214 $269 $269 $432
Current Ratio 4.31 5.38 3.76 3.94
Net Debt / EBITDA -0.34 0.25 -0.4 -0.26
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.