Ranger: Exceedingly Cheap US Energy Services Company

Dan Roller of Maran Capital Management presented his in-depth investment thesis on Ranger Energy Services (US: RNGR) at Best Ideas 2020.

Thesis summary:

Ranger Energy Services is an off-the-beaten-path US energy services company trading at a cheap price. It is in an out-of-favor sector, illiquid, small cap, and a “broken” IPO, yet has high insider ownership (60+%), is well run, taking share, gushing cash, and buying back stock.

Against its ~$100 million market cap and ~$40 million of debt, the company should generate ~$50 million of EBITDA and ~$35 million of FCF, putting the valuation at less than 3x EBITDA and over a 33% FCF yield to the equity; it also trades at ~0.5x tangible book. This is for a company that is taking share given its new, best-in-class equipment and strong financial position (many competitors have aging rigs and too much debt).

In the past few quarters, Ranger has won new multi-year contracts with oil majors such as Chevron and Conoco. Dan believes the upside is 100% to several hundred percent under various scenarios, and that risk of permanent capital loss is limited.

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About the instructor:

Dan Roller is the founder of Maran Capital Management, a boutique investment manager based in Denver, CO. Dan has a firm commitment to disciplined value investing with a focus on inefficient areas of the market. He takes a long-term approach and manages a concentrated portfolio of his best ideas. Dan has been connecting dots and unearthing value for over fifteen years. Prior to forming Maran, he honed his investment philosophy and process for over a decade working in analyst and portfolio manager roles on the buyside in New York. Dan received a BSE in electrical engineering, with a second major in computer science, from Duke University in 2003. In addition to being a passionate value investor, Dan enjoys spending time with his wife and two daughters (after whom Maran is named), reading, and getting outdoors in the Rocky Mountains.