International Markets And Automation Will Improve Global Operations

Key Takeaways

• Focus on international and offshore markets, coupled with strong contract backlogs, may enhance revenue growth and net margins.
  
• Investments in automation and cost-effective technologies, along with M&A strategy, could boost operational performance and financial outcomes.
  
• Tariff impacts and geopolitical tensions combined with commodity price volatility pose risks to revenue and profitability due to increased costs and delayed project approvals.

Catalysts

Provides energy services in North and Latin America, Europe and Sub-Saharan Africa, the Middle East and North Africa, and the Asia-Pacific.

• Expro's focus on international and offshore markets, which are expected to remain positive in the long term due to rising natural gas demand and stable offshore oil demand, could enhance future revenue growth.
  
• The company's successful contract awards and a healthy backlog of $2.2 billion may lead to consistent revenue generation and potentially improve net margins due to increased operational efficiencies.
  
• Expro’s ongoing investments in automation and cost-effective technologies, such as CENTRI-FI and iCAM, are expected to boost operating efficiencies and safety, potentially leading to better net margins.
  
• The MENA region's strong performance and stable growth prospects could support sustained revenue and margin strength due to reliable contracts in markets such as Saudi Arabia and Algeria.
  
• Expro's M&A strategy and cost optimization initiatives like Drive 25 are poised to enhance operational performance, potentially improving earnings and cash flows by driving margin expansion.

Expro Group Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Expro Group Holdings's revenue will decrease by 0.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.0% today to 5.2% in 3 years time.
• Analysts expect earnings to reach $90.9 million (and earnings per share of $1.96) by about May 2028, up from $51.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.5x on those 2028 earnings, up from 18.0x today. This future PE is greater than the current PE for the US Energy Services industry at 10.5x.
• Analysts expect the number of shares outstanding to grow by 5.28% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.49%, as per the Simply Wall St company report.

Expro Group Holdings Future Earnings Per Share Growth

Risks

• The company faces significant near-term uncertainty and volatility due to global oil markets being affected by tariff announcements and OPEC+ production increases, which could impact revenue by creating hesitations around new project sanctions.
  
• A potential trade war between the U.S. and China introduces a risk to global demand, specifically posing a threat to China's long-term oil consumption, which could negatively affect Expro's future revenue projections.
  
• There is a concern about commodity price volatility and weaker commodity prices, which might lead to reductions in customer discretionary spending and new project sanctioning, thereby impacting Expro's revenue and earnings potential.
  
• The possibility of delays in offshore project approvals, particularly in regions like West Africa, could postpone the upcycle and result in lower-than-expected activity in Expro's well construction and management services, affecting revenue.
  
• Tariff impacts and geopolitical tensions could increase operational costs, which may result in lower margins and overall profitability, depending on the company's ability to adjust costs and pass on costs to customers.

Valuation

• The analysts have a consensus price target of $16.0 for Expro Group Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $24.0, and the most bearish reporting a price target of just $12.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.7 billion, earnings will come to $90.9 million, and it would be trading on a PE ratio of 29.5x, assuming you use a discount rate of 7.5%.
  
• Given the current share price of $8.04, the analyst price target of $16.0 is 49.8% 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.