Aris Water Solutions’ Stock Forecast: Should You Buy ARIS IPO Stock?

The IPO schedule for late Oct. 2021 looks solid, with many companies set to price their IPOs. Aris Water Solutions is also expected to begin trading this week, under the ticker symbol “ARIS” on the NYSE. What's the stock's forecast? Should you buy ARIS IPO stock?

Aris Water Solutions provides water handling and recycling solutions to oil and gas companies in the Permian Basin. At the midpoint of the IPO range, the company would raise around $300 million.

Aris stock is expected to begin trading publicly on Oct. 22. Public stock market debuts typically start between 10 a.m. and 2 p.m. ET. A total of 17.7 million shares will be on offer. The company has kept its IPO price range of between $16 and $18.

Goldman Sachs, Citigroup, JPMorgan Chase, and Wells Fargo Securities are the joint lead bookrunning managers for the offering. Underwriters have the option to buy an additional 2.6 million shares at the IPO price.

Aris posted a net income of $7.4 million in the first half of 2021, $7,000 in 2020, and $13.1 million in 2019. In the first half of 2021, the company's revenue rose 22 percent year-over-year (YoY) to $102.8 million, and in 2020, it increased 44 percent YoY.

The outlook for Aris looks promising. The market opportunity for water management services in the Permian Basin is significant, but subject to fluctuating oil and gas prices and exploration and production (E&P) operator demand for new drilling.

The U.S. oilfield water management industry was estimated to be worth $37.5 billion in 2019—a YoY rise of about 12 percent, according to IHS Markit. The major driver for this significant growth is demand surging in the Permian Basin, which is estimated to have accounted for $13.3 billion in spending in 2019.

Aris provides full-cycle water management and recycling services to help energy companies to operate more sustainably. The company delivers water management solutions through its integrated pipelines and associated infrastructure. Aris counts major active E&P operators as its customers, including Exxon Mobil, Marathon Oil, and Chevron. Aris’s existing investors include COG Operating, Yorktown Energy Partners, and Solaris Midstream Investment.

Aris could hit the market at a valuation of more than $920 million. Based on its pro forma market cap, Aris’s 2020 price-to-sales multiple is 9.0x. To compare, Select Energy Services (WTTR) stock trades at the next-12-month EV-to-sales multiple of 0.8x. Overall, Aris IPO doesn’t look like a good buy, as it’s seeking higher revenue multiples.

Once Aris stock starts trading publicly, you’ll be able to purchase it through your discount or traditional broker.