CASE STUDY: Ranger Energy Services (RNGR)

October 31, 2021

I first wrote up the idea of RNGR in January 2020 here:

At the time, the stock at $6.83 a share was very cheap based on our five measures of cheapness:

    • EV/EBITDA = 2.96
    • P/E = 17.51
    • P/B = 0.53
    • P/CF = 2.20
    • P/S = 0.31

Since then, Ranger has made a series of acquisitions at low multiples.  Here are the estimates for 2022 figures:  EBITDA of $125 million, earnings of $45 million, cash flow of $120 million, and sales of $500 million.

Here are the multiples based on the 2022 estimates:

    • EV/EBITDA = 1.75
    • P/E = 4.45
    • P/B = 0.44
    • P/CF = 1.48
    • P/S = 0.36

The company named Stuart Bodden as the new CEO effective September 1, 2021.  (Bill Austin, Chairman of the Board of Directors, was interim CEO. )  Bodden has 20+ years of experience in various executive roles in the oil and gas industry.  Bodden was a Partner at McKinsey & Company, leading projects in the oilfield services and upstream oil and gas sectors.  Bodden received his Bachelor of Science degree from Brown University and his Master of Business Administration from The University of Texas, Austin.

Insiders own 19% of the shares outstanding, which is worth about $34 million (at today’s stock price of $9.95).  Insiders can make a lot of money if they successfully lead the company forward.

Ranger Energy Services has a Piotroski F_Score of 3.  This is low because the company has recently made a series of acquisitions.  As the company moves through 2022, its F_Score will rise.

Debt is low at $49 million.  TL/TA is 30%, which is good.  Also, the company is targeting debt of zero.

The oil price (WTI) is $83.57.  If oil prices stay around this level, Ranger Energy Services will comfortably hit its targets for 2022.

For a good take on how tight oil supplies are currently, check out this piece by Josh Young of Bison Interests, “OPEC+ Spare Capacity is Insufficient Amid Global Energy Crisis.”  Link:

More importantly, demand is very strongly increasing, which will continue.  See this recent note from Bridgewater Associates, “It’s Mostly a Demand Shock, Not a Supply Shock, and It’s Everywhere:

Bridgewater argues that the supply of everything is at all-time highs.  But demand across most areas is much stronger than supply.  Demand is being driven by the MP3, which is a combination of monetary and fiscal policy.  Due to the large amount of money the Federal Reserve has been printing, coupled with large fiscal stimulus, a massive amount of cash has been transferred to households.  Consumer spending has created demand that cannot be met by the increased supply.

Bridgewater concludes that demand is outstripping supply by a wide enough margin that high inflation will probably be mostly sustained, especially because extremely easy government policy continues to encourage further demand rather than limiting it.

Finally, even if car manufacturers started making only all-electric vehicles today, oil demand would keep rising for many years, as Daniel Yergin points out in The New Map.

Intrinsic value scenarios:

    • Low case: RNGR is probably worth at least 50% of book value.  That is $11.30, which is over 10% higher than today’s $9.95.
    • Mid case: The P/E = 4.45 relative to 2022 earnings.  But the P/E should be at least 15.  This implies over 335% upside from today’s $9.95, or an intrinsic value of at least $43.50 per share.
    • High case: Oil prices could exceed $100 (WTI).  In that case, RNGR could be worth $70 per share.  That is 600% higher than today’s $9.95.



An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.




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