WTTR: Strong Execution And New Facility Will Drive Profitability Higher

Analysts have increased their price target for Select Water Solutions by $1 to $16. They cite solid quarterly performance across core divisions and improved guidance supported by strength in Chemical Technologies.

Analyst Commentary

Following recent quarterly results and updated guidance, analysts have updated their perspectives on Select Water Solutions. The following summarizes key optimistic and cautious considerations shaping the outlook on the shares and valuation.

Bullish Takeaways

• Strong performance in both Water Infrastructure and Water Services divisions, with results meeting profitability guidance.
• Notable traction in new Chemical Technologies products, significantly contributing to outperformance in the recent quarter and supporting upward revisions to forecasts.
• Improved guidance for the fourth quarter, indicating management’s confidence in sustained operational execution and superior profitability metrics relative to market expectations.
• Enhanced product and segment diversification, which supports ongoing growth and strengthens the company's competitive positioning.

Bearish Takeaways

• Near-term valuation may already reflect much of the recent outperformance. This could potentially limit further upside in the share price.
• Profitability remains dependent on continued execution in core divisions and successful scaling of new technology initiatives.
• Future growth could be challenged by competitive pressures or slower adoption in emerging segments, particularly within Chemical Technologies.
• Macroeconomic factors and broader market conditions may introduce volatility into quarterly performance and forward-looking estimates.

What's in the News

• Select Water Solutions and Mariana Minerals broke ground on a pioneering lithium extraction facility in Joaquin, Texas. The facility is focused on converting oil and gas wastewater into marketable lithium salts (Key Developments).
• The facility will leverage Select's extensive water treatment expertise and pipeline network. Select will earn royalties for providing access and management of produced water streams (Key Developments).
• Designed to produce up to 3,000 metric tons per year of high-purity lithium salts, the site utilizes existing infrastructure to avoid new brine wells or utility build-out (Key Developments).
• Construction is expected to continue through December 2026. Commercial production is targeted for the first half of 2027 (Key Developments).
• This initiative exemplifies Select's strategy to create value from current water infrastructure while enhancing domestic energy and critical minerals supply chains (Key Developments).

Valuation Changes

• Discount Rate: Decreased moderately from 7.81% to 7.45%, reflecting improved perceived risk or capital structure efficiencies.
• Revenue Growth: Shifted from a decline of -1.26% to a mild growth of 0.21%. This suggests an improved outlook on top-line expansion.
• Net Profit Margin: Edged down slightly from 4.67% to 4.50%, indicating minor pressure on profitability expectations.
• Future P/E: Increased from 29.34x to 30.63x. This implies a modest rise in valuation multiples on future earnings.
• Fair Value Estimate: Remained steady at $14.33, with revised inputs not materially altering the intrinsic value assessment.