Natural Gas Services Group, Inc.

NGS Details

Natural Gas Services Group, Inc. (NYSE: NGS) sells natural gas compressors and other associated equipment designed, manufactured, and rented by itself. The CiP (Cylinder-inPlane) product line is a unique collection of compressor frames, cylinders, and components developed by the company.

Why Should Investors Exit?

• Widened losses: Despite an increase in revenue, the company had posted an increase in net losses of USD 1.26 million in Q3 FY21 compared to USD 0.56 million in Q3 FY20 due to a substantial increase in interest costs and rising operating expenses.
• Decline in Cash Position: The company’s cash position as of September 30, 2021, was USD 24.42 million compared to USD 28.93 million as of December 31, 2020
• Weak Margins: In Q3 FY21, the company's gross, EBITDA, operating, and net margins were much lower than the industry median.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Source: Analysis by Kalkine Group

Stock Recommendation:

We have valued the stock using the EV/sales multiple based relative valuation methodology and arrived at a target price of USD 10.11 as of February 17, 2022. Considering the weak financial performance, decline in cash position, colossal market competition, unfavourable technical indicator, and current valuation, we recommend a “SELL" rating on the stock at the closing price of USD 11.74, unchanged, as of February 17, 2022.

Technical Summary Analysis:

Year Technical Price Chart (as of February 17, 2022). Source: REFINITIV, Analysis by Kalkine Group

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.