Disclosure: Enterprise Group, Inc. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
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Price and Volume (1-year)
* Enterprise Group has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions. All figures in C$ unless otherwise specified.
Enterprise vs Larger Players
We forecast E’s 2025 revenue growth to match the sector average and note its comparable margins, lower debt, and favorable EV/Revenue and EV/EBITDA multiples
Source: FRC / S&P Capital IQ
Despite this, the stock has lagged peers (-28% YoY vs. +16% YoY) without clear justification, highlighting potential upside
Financials
Q3 revenue rose 35% YoY vs. (16%) in H1, in line with our estimate
Gross margins expanded 5 pp YoY to 42%, though still below our 45% forecast
*Sector: Oil & Gas Machinery Rental and Leasing
G&A expenses were flat YoY (H1: +20%) and 9% below our estimate
Following the Q2 FlexEnergy acquisition, forecasting EPS remains somewhat challenging without more clarity on stabilized G&A expenses, and gross margins
EPS turned positive but came in 10% below our estimate, driven by lower gross margins
CAPEX surged 141% to $32M, driven primarily by the FlexEnergy acquisition in Q2
Source: FRC / Company
Debt/capital increased QoQ (from 23% to 29%) but remained below the sector average of 33%
Can raise up to $10M from in-the-money options and warrants
Oil & Gas Price Outlook
Source: FRC/Sproule/GLJ
Consensus oil price forecasts (near and long-term) are well above historic averages of US$70/bbl oil and $2.6/mmbtu gas), implying a positive outlook for the oilfield services sector
Source: FRC/Various
E's revenue generally tracks changes in oil and gas prices, and sector CAPEX spending
Historically, a 1.0% change in oil and gas prices has led to a 1.9% change in E's revenue
FRC Projections and Valuation
With Q3 gross margins below expectations, we are lowering our EPS forecasts
Source: FRC
As a result, our DCF valuation fell from $3.04 to $2.89/share
Source: FRC / S&P Capital IQ
Sector multiples are up 11% since our previous report in August
Our fair value decreased from $2.42 to $2.38/share, driven by lower EBITDA and EPS forecasts, partially offset by higher sector multiples
We are reiterating our BUY rating, and adjusting our fair value estimate from $2.42 to $2.38/share (the average of our DCF and comparables valuations). E delivered strong Q3 revenue growth, up 35% YoY, though EPS came in 10% below expectations due to lower gross margins. The company’s balance sheet is solid, with debt below the sector average, yet its share price has lagged peers for no justifiable reason. With North American oil and gas CAPEX projected to rise 5–7% in 2026, we believe E is well-positioned to benefit.
Risks
We believe the company is exposed to the following key risks (not exhaustive):
Maintaining our risk rating of 3 (Average)
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