Enservco Corporation (ENSV) in Denver, Colo., offers a comprehensive range of oilfield services that include hot oiling, acidizing, frac water heating, and other related services. The company has a broad geographic footprint that includes seven major domestic oil and gas basins in Colorado, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming, and West Virginia.

While the company's shares have gained significant momentum over the past month owing to surging crude oil prices, there is little or no company-specific news driving the price rally. In addition, ENSV has a history of long-term share price weakness. It has declined 55.8% in price over the past three months and 52.2% over the past five years. And its revenue and total assets have declined at a CAGR of 31.5% and 4%, respectively, over the past three years.

Here is what could shape ENSV's performance in the near term:

Inadequate Financials

ENSV's total revenue increased 71.6% year-over-year to $3.03 million for the third quarter, ended Sept. 30, 2021. However, its operating loss came in at $2.86 million. The company's net loss came in at $177,000, compared to a $8.41 million net profit in the prior-year quarter. Its loss per share amounted to $0.02, compared to an EPS of $2.15. In addition, its net cash used in operating activities increased 69.2% for the nine months ended Sep. 30, 2021, to $3.88 million.

Poor Profitability

ENSV's 2.7% trailing-12-months CAPEX/Sales multiple is 69.2% lower than the 8.7% industry average. Also, its ROA, ROC, and net income margin are negative 27.3%, 24.1%, and 56.2%, respectively. Furthermore, its trailing-12-month cash from operations stood at negative $6.03 million compared to its $305.57 million industry average.

POWR Ratings Reflect Uncertainty

ENSV has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ENSV has an F grade for Stability and a D for Growth. The stock’s 1.07 beta is consistent with its  Stability grade. In addition, the ENSV's poor profitability and weak financials are in sync with the Growth grade.

Among the 93 stocks in the C-rated Energy – Oil & Gas industry, ENSV is ranked #83.

Beyond what I have stated above, one can view ENSV ratings for Quality, Value, Sentiment, and Momentum here.

Bottom Line

ENSV's lackluster financials and weak profitability have been a cause of concern for investors as its industry peers make solid advancements amid surging crude oil prices. In addition, analysts expect its EPS to remain negative in its fiscal years 2021 and 2022. Therefore, we believe the stock is best avoided now.

How Does Enservco Corporation (ENSV) Stack Up Against its Peers?

While ENSV has an overall D rating, one might want to consider its industry peers, California Resources Corporation (CRC), Baytex Energy Corp. (BTEGF), and VAALCO Energy Inc. (EGY) which have an overall B (Buy) rating.

ENSV shares fell $0.27 (-8.36%) in premarket trading Tuesday. Year-to-date, ENSV has gained 238.80%, versus a -11.71% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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