On Thursday, BMO Capital Markets adjusted its outlook on Step Energy Services Ltd. (STEP:CN) (OTC: SNVVF) shares, increasing the firm's price target to C$5.00 from the previous C$4.75. The company's stock rating remains at Market Perform.
This revision follows Step Energy Services' record first quarter results for 2024, which were attributed to high equipment usage rates in Canada and enhanced profitability in the United States.
The strong performance in the first quarter was notably driven by robust demand in Canada, where Step Energy Services saw significant utilization of its services. The improvement in the U.S. market also contributed to the company's record results, reflecting an uptick in profitability in the region.
Despite the positive outcome of the quarter, BMO Capital Markets expressed caution due to Step Energy Services' exposure to the U.S. market. The firm acknowledged the current undervaluation of Step Energy Services' shares in relation to the potential growth in its business, yet opted to maintain a neutral Market Perform stance.
The new price target of C$5.00 represents approximately twice the company's expected 2025 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). This adjustment is a response to the company's performance post the first quarter, indicating a positive outlook on the company's valuation.
Step Energy Services Ltd. specializes in providing coiled tubing and fracturing solutions to the energy sector, operating primarily in the Western Canadian Sedimentary Basin and the United States. The company's recent financial results and the subsequent price target increase reflect its current operational success and market position.
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