One of the cheapest stocks in our All Investable Stock Screener is Mammoth Energy Services Inc (NASDAQ: TUSK).
Mammoth Energy Services Inc (Mammoth) is an integrated, growth-oriented energy service company serving companies engaged in the exploration and development of North American onshore unconventional oil and natural gas reserves. The company segments include pressure pumping services, infrastructure services, natural sand proppant services, contract land and drilling services and other energy services. The company derived revenue from United States, Puerto Rico and Canada.
A quick look at Mammoth’s share price history below over the past twelve months shows that the price is up 216%, but here’s why the company remains undervalued.
(SOURCE: GOOGLE FINANCE)
The following data is from the company’s latest financial statements, dated June 2018.
The company’s latest balance sheet shows that Mammoth has $11 Million in total cash and cash equivalents. Further down the balance sheet we can see that the company has zero debt. Therefore, Mammoth has a net cash position of $11 Million (cash minus total debt).
Financial strength indicators show that the company has a Piotroski F-Score of 7, an Altman Z-Score of 4.89, and a Beneish M-Score of 0.99. All of which illustrate that the company remains financial strong.
If we consider that Mammoth currently has a market cap of $1.578 Billion, when we subtract the net cash totaling $11 Million that equates to an Enterprise Value of $1.567 Billion.
If we move over to the company’s latest income statements we can see that Mammoth has $282 Million* in trailing twelve month operating earnings which means that the company is currently trading on an Acquirer’s Multiple of 5.56, or 5.56 times operating earnings. That places Mammoth squarely in undervalued territory.
The Acquirer’s Multiple is defined as:
Enterprise Value/Operating Earnings*
*We make adjustments to operating earnings by constructing an operating earnings figure from the top of the income statement down, where EBIT and EBITDA are constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–income that a company does not expect to recur in future years–ensures that these earnings are related only to operations.
It’s also important to note that if we take a look at the company’s latest cash flow statements we can see that Mammoth generated trailing twelve month operating cash flow of $260 Million and had $176 Million in Capex. That equates to $84 Million in trailing twelve month free cash flow, or a FCF/EV Yield of 5%.
In terms of Mammoth’s annualized Return on Equity (ROE) for the quarter ending June 2018. A quick calculation shows that the company had $564 Million in equity for the quarter ending March 2018 and $626 Million for the quarter ending June 2018. If we divide the combined total of both numbers by two we get $595 Million. If we consider that the company has $163 Million in net income (ttm), that equates to an annualized Return on Equity (ROE) for the quarter ending June 2018 of 27%.
Other considerations regarding Mammoth include the company’s trailing twelve month revenue of $1.546 Billion, which is higher than any one of the full-year revenues posted in the past five years. The company’s net income of $163 Million (ttm) is the highest in the past five years and 176% higher than the FY2017 net income of $59 Million. Lastly, Mammoth’s free-cash-flow of $84 Million (ttm) is 210% higher than the loss of ($76 Million) recorded for FY2017, and a record high in the past five years.
Summary
In summary, Mammoth is trading on a P/E of 9.7 and an Acquirer’s Multiple of 5.56, or 5.56 times operating earnings. The company has a strong balance sheet with a net cash position of $11 Million and zero debt. Financial strength indicators show that Mammoth is financially sound with a Piotroski F-Score of 7, an Altman Z-Score of 4.89, and a Beneish M-Score of 0.99. The company also generates a FCF/EV Yield of 5% (ttm) and has an annualized return on equity of 27% for the quarter ending June 2018. Mammoth’s revenue of $1.546 Billion (ttm), net income of $163 Million (ttm), and free-cash-flow of $84 Million (ttm) are all record highs in the past five years.
Superinvestors Currently Holding Positions In Mammoth include:
There are a number of superinvestors currently holding positions in Mammoth including Murray Stahl, Chuck Royce, Jim Simons, Joel Greenblatt, Ken Griffin, and Cliff Asness.
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