Three Reasons to Sell Nuverra Environmental Solutions Inc (NES)

2. Not yet profitable, and carrying lots of debt
According to the company’s most recent quarterly report, Nuverra Environmental Solutions Inc (NYSE:NES) is currently carrying a debt load of $562 million, and has just $18 million in cash and equivalents on hand. That’s what happens when a small company attempts to build out the infrastructure to be a major player in an industry — it has to spend a lot of money up front in hopes of future profits.

Investors need to combine this fact, with the reality that the company has yet to report a profitable year, in mind before investing.Nuverra Environmental Solutions Inc (NYSE:NES) has said its capital spending as about to shrink significantly, but there’s no guarantee its past investments will eventually pay off.

3. Counting on limited clientele
The final knock on Nuverra Environmental Solutions Inc (NYSE:NES) is that it has a couple major energy companies that account for large parts of its revenue. In 2012, Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and Chesapeake Energy Corporation (NYSE:CHK) accounted for 29% of all revenue. If either company were to find a different water-service provider, it would create a significant problem for Nuverra Environmental Solutions Inc (NYSE:NES).

What I’m doing
Taking all of this into consideration, I’m happy that Nuverra currently only accounts for 1% of my portfolio. There’s a lot of risk here, but a lot of upside potential as well.

The article 3 Reasons to Sell Nuverra Environmental Services originally appeared on Fool.com.

Fool contributor Brian Stoffel owns shares of Westport Innovations and Nuverra Environmental Solutions. The Motley Fool recommends Clean Energy Fuels and Westport Innovations. The Motley Fool owns shares of Nuverra Environmental Solutions and Westport Innovations and has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, Short Jan 2014 $15 Puts on Chesapeake Energy, Long Jan 2014 $4 Calls on Nuverra Environmental Solutions , and Short Jan 2014 $3 Puts on Nuverra Environmental Solutions.

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