On Monday, Precision Drilling (NYSE:PDS) Corporation's (NYSE:PDS) stock received a boost as Piper Sandler increased its price target on the company's shares to $101.00, up from the previous target of $81.00. The firm has maintained its Overweight rating on the stock.
The decision to raise the price target was influenced by an adjustment in the valuation multiple to 5 times the estimated 2025 enterprise value to EBITDA (EV/EBITDA) ratio, up from 4.1 times. This change reflects a desire to align Precision Drilling's target valuations more closely with those of its peers. The new price target is based on an anticipated EBITDA of C$574 million, net debt of C$907 million as of the first quarter of 2024, and a count of 14 million fully diluted shares.
Piper Sandler's revised outlook acknowledges the potential risks facing Precision Drilling, which include a challenging North American energy macro environment, upcoming contract expirations, and the company's high debt levels. These factors could impact the company's performance and are important considerations for investors.
The Overweight rating suggests that Piper Sandler views Precision Drilling's stock as a better value than the average stock within the analyst's coverage universe. The price target increase indicates an expectation of potential stock performance that may outpace the broader market or the analyst's sector benchmark.
Precision Drilling, listed on the New York Stock Exchange under the ticker PDS, is a provider of drilling and related services to the oil and gas industry. The company operates primarily in North America, offering a range of services, including contract drilling, well servicing, and strategic support services.
InvestingPro Insights
Precision Drilling Corporation's recent price target uplift by Piper Sandler to $101.00 reflects a positive outlook, and real-time data from InvestingPro further enriches this perspective. The company currently boasts a market capitalization of $1.03 billion and an attractive P/E ratio of 5.85, which suggests that the stock may be undervalued relative to its earnings. Notably, Precision Drilling's P/E ratio has adjusted to 6.96 over the last twelve months as of Q1 2024, indicating a slight increase but still maintaining a value investment profile.
InvestingPro Tips highlight that Precision Drilling has a high shareholder yield and has consistently raised its dividend for four consecutive years, signaling a commitment to returning value to shareholders. Additionally, the company's liquid assets exceed its short-term obligations, providing a buffer for financial flexibility. While some analysts have revised their earnings downwards for the upcoming period, the company is expected to be profitable this year and has been profitable over the last twelve months. Moreover, the stock is trading near its 52-week high, with a strong return of 14.1% over the last three months, suggesting robust investor confidence.
For investors seeking to delve deeper into Precision Drilling's financial health and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/PDS. Using the coupon code PRONEWS24, readers can obtain an additional 10% off a yearly or biyearly Pro and Pro+ subscription, accessing a wealth of investment insights to inform their decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.