We came across a bullish thesis on Mammoth Energy Services, Inc. (TUSK) on Hidden Rock Capital’s Newsletter’s Substack by Hidden Rock Capital. In this article, we will summarize the bulls’ thesis on TUSK. Mammoth Energy Services, Inc. (TUSK)’s share was trading at $4.33 as of Oct 25th.
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Mammoth Energy Services (TUSK) presents a compelling value play with its diverse operations across oilfield services, infrastructure, and sand proppants for fracking. Currently, the primary catalyst is in its infrastructure business, where TUSK provided critical disaster recovery services in Puerto Rico. After years of waiting for payment, TUSK recently secured a $188 million settlement with the Puerto Rico Electric Power Authority (PREPA), having received $150 million in October 2024, with the remaining $38 million anticipated soon.
This payout substantially impacts TUSK’s financial position. With a market cap of $215 million at a $4.50/share price and a net debt of $37 million, the settlement leaves TUSK with an estimated pro forma net cash of $151 million—representing around 70% of its current market cap. Stripping out this cash value, the market assigns only $64 million to TUSK’s operational assets, a stark undervaluation given the company’s asset base, including 52 dual-fuel pumps and 4.4 million tons of annual frac sand capacity.
However, TUSK’s infrastructure segment holds the most potential, offering electric and telecom infrastructure solutions, from transmission lines to storm repair. This segment is well-positioned to benefit from rising power demand, particularly driven by AI growth and frequent extreme weather events. With cash in hand, management has already allocated some toward debt reduction and increased CAPEX for 2024. There’s also potential for a strategic review, where TUSK could consider divesting its smaller energy businesses to focus on its thriving infrastructure segment, unlocking further value. Despite a recent stock price bump post-PREPA news, TUSK remains undervalued, with significant optionality and upside, making it a promising opportunity for deep value investors looking to capitalize on this transformative cash influx.
Mammoth Energy Services, Inc. (TUSK) is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 8 hedge fund portfolios held TUSK at the end of the second quarter which was 8 in the previous quarter. While we acknowledge the risk and potential of TUSK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TUSK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.