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Flotek Industries: Wall Street’s Target and Relative Valuation

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Flotek Industries: Wall Street’s Target and Relative Valuation PART 1 OF 7

Will Flotek Industries’ Strategies Improve Its Returns in 2017?

Flotek Industries’ returns

Flotek Industries’ (FTK) stock price has fallen 60% in the past year as of August 10, 2017. To learn about Flotek Industries’ various value drivers, read 2Q17 Results Analysis: Why Flotek Industries Stock Is Falling.

The Energy Select Sector SPDR ETF (XLE) has produced -6% returns since August 10, 2016. Flotek Industries underperformed the VanEck Vectors Oil Services ETF (OIH). OIH has generated -20% returns in the past year. OIH is an ETF tracking an index of 25 OFS (oilfield equipment and services) companies. The SPDR S&P 500 ETF (SPY) has significantly outperformed Flotek Industries by producing 11% returns during the same period. The Dow Jones Industrial Average (DJIA-INDEX) has risen 17% in the past year.

Will Flotek Industries’ Strategies Improve Its Returns in 2017?

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Crude oil prices and US rigs

In the past year, West Texas Intermediate crude oil prices have risen 12%. Crude oil has been volatile in 2017. Read What Could Push US Crude Near the $50 Mark? for the latest on crude oil prices. Led by steady crude oil prices, the US rig count nearly doubled in the past year. To learn how OFS companies like Halliburton (HAL) and Schlumberger (SLB) have been faring recently, read SLB, HAL, NOV, WFT: How They Stack Up after 2Q17.

Store model and analytics

  • Optimizing Flotek’s store – Flotek Industries sells its conventional chemistry or non-CnF (Complex nano-Fluid) components through Flotek stores. According to Flotek’s management, upstream operators are gradually decoupling their energy chemistry selection and purchases. Flotek’s store business model caught this trend early—more than two years ago. Now, the company is benefiting from being an early mover.
  • Using analytics – Flotek Industries signed an agreement with IBM in May 2017 to start the joint development of a cognitive reservoir performance system. The system is expected to allow Flotek to predict and apply custom chemistry and other approaches to enhance the wells’ performance.

Series highlights

In this series, we’ll analyze relative valuation multiples, what the market indicators are saying about Flotek stock, and Wall Street analysts’ recommendations on Flotek Industries. We’ll start with Flotek Industries’ historical valuation multiples.

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