Global Energy Transition Will Drive LNG Infrastructure Expansion

Key Takeaways

• Advanced contract negotiations and operational scale-up could significantly boost recurring revenues and profitability through higher-margin, multi-year contracts in specialized, high-growth sectors.
  
• Stabilis's mobile LNG solutions and first-mover position in emerging markets enable strong ESG-driven customer acquisition, creating defensible profit streams and long-term growth opportunities.
  
• Heavy reliance on a few major contracts, high capital expenditures, and exposure to declining LNG demand threaten sustained profitability and predictable revenue growth.

Catalysts

An energy transition company, provides turnkey clean energy production, storage, transportation, and fueling solutions primarily using liquefied natural gas (LNG) to various end markets in North America.

• Analyst consensus notes pending commercial contracts and liquefaction expansion as incremental growth drivers, but these likely understate the magnitude-multiple contracts are in advanced negotiation with near-term visibility, and operational scale-up could double or even triple segment revenues and drive substantial operating leverage as new capacity comes online.
  
• While rising distributed power, marine, and aerospace demand are widely expected to drive steady revenue increases, analyst consensus overlooks the mix shift toward higher-value, multi-year contracts in specialized sectors like commercial aerospace and digital infrastructure, which will accelerate both gross margin expansion and recurring earnings growth, not just top-line volume.
  
• A major surge in corporate ESG adoption and regulatory tailwinds is set to dramatically accelerate customer transitions from diesel to LNG, potentially unlocking an unprecedented wave of customer acquisitions and greatly expanding Stabilis's long-term recurring revenue base.
  
• Stabilis's highly flexible mobile LNG infrastructure and unique technical expertise position it as the preferred provider for rapid-response energy and resilient backup power solutions in disaster-prone and remote, high-growth regions, creating new, defensible profit streams insulated from traditional grid disruptions.
  
• The company's early investment in proprietary LNG production, cross-border logistics, and entry into underpenetrated Latin American markets provides Stabilis a first-mover advantage, positioning it to capture exponential earnings growth from both export arbitrage and surging energy infrastructure demand in emerging economies.

Stabilis Solutions Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Stabilis Solutions compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Stabilis Solutions's revenue will grow by 10.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.2% today to 5.1% in 3 years time.
• The bullish analysts expect earnings to reach $4.9 million (and earnings per share of $0.27) by about July 2028, up from $1.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 52.9x on those 2028 earnings, down from 58.8x today. This future PE is greater than the current PE for the US Oil and Gas industry at 12.3x.
• Analysts expect the number of shares outstanding to grow by 0.06% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.4%, as per the Simply Wall St company report.

Stabilis Solutions Future Earnings Per Share Growth

Risks

• Stabilis Solutions' revenue declined 12 percent year-over-year this quarter, mainly due to the roll-off of a large industrial contract and temporary reductions in demand from a key marine customer, reflecting the company's sensitivity to customer concentration and contract timing which may result in further revenue volatility and limit top-line stability in the long term.
  
• The company is investing heavily in front-end engineering, commercial, and technical teams, and future growth will require incremental capital for infrastructure expansion at locations such as the Gulf Coast, increasing the risk that high capital expenditure requirements could depress free cash flow and net margins if new contracts do not materialize as expected.
  
• Stabilis's small-scale LNG focus leaves it exposed to the long-term risk of shrinking demand for LNG, as intensifying global decarbonization policies and the accelerated adoption of renewables and new zero-carbon technologies may erode its addressable market and adversely affect both revenue and earnings over time.
  
• Stabilis's adjusted EBITDA margin fell from 15.7 percent to 11.9 percent year-over-year, mainly due to lower equipment and labor revenues associated with a completed customer contract, indicating margin compression that could persist if industry competition intensifies and customers continue to dictate terms in a consolidating LNG sector.
  
• Despite management's optimism about long-term growth in sectors like marine bunkering, power generation, and aerospace, the company's underlying results already show net losses and declining profitability, highlighting the risk that continued exposure to commodity price volatility or a plateau in global LNG demand could further compress revenue and earnings in future years.

Valuation

• The assumed bullish price target for Stabilis Solutions is $12.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Stabilis Solutions's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $12.0, and the most bearish reporting a price target of just $9.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $96.0 million, earnings will come to $4.9 million, and it would be trading on a PE ratio of 52.9x, assuming you use a discount rate of 6.4%.
• Given the current share price of $4.84, the bullish analyst price target of $12.0 is 59.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.