Stable Cash Flows (Mis)Priced as Cyclical

This company is trading at cyclical lows, but the market is missing its growing, stable infrastructure-like cash flowing subsidiary.

Some of the best opportunities I’ve found come when the market prices a company with both stable and cyclical businesses as if it were entirely cyclical.

At cycle lows, these companies trade at very low valuations because investors overlook the steady cash flow coming from the non-cyclical side.

This article addresses one such company. About half of this company’s cash flow comes from its oilfield services division, which has struggled over the past year as new oilfield activity and day rates declined with weaker oil prices. That poor performance has weighed on the stock, much like it has for other oilfield services companies.

But what makes this company unique, and what the market appears to be missing, is that the other half of its cash flow comes from an infrastructure-like business, which is tied to the continuous movement of natural gas and generates stable, non-cyclical cash flows. And that part of its business is growing rapidly.

And as gas demand and production grows, driven by AI data center needs and LNG export facilities, the needs for this infrastructure will rise as well, creating a strong structural tailwind for an already steady, high cash-generating segment of the business.

This company checks many boxes:

✅ Undervalued on present and expected forward cash flow metrics

✅ Structural tailwinds providing future upside

✅ Substantial return of capital to shareholders in place

✅ High insider ownership

✅ “Hidden” asset that is significant, mispriced, growing and misunderstood