Target Hospitality (TH) AI Stock Analysis

• Market Cap: $627.46M
• Dividend Yield: N/A
• Average Volume (3M): 544.30K
• Price to Earnings (P/E): 9.0
• Beta (1Y): -0.12
• Revenue Growth: -31.46%
• EPS Growth: -56.72%
• Country: US
• Employees: 770
• Sector: Industrials
• Sector Strength: 72
• Industry: Specialty Business Services
• EPS (TTM): 0.70
• Shares Outstanding: 98,813,130
• 10 Day Avg. Volume: 325,861
• 30 Day Avg. Volume: 544,305
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 1.38
• Price to Cash Flow (P/CF): 4.70
• P/FCF Ratio: 4.30
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $8.75
• Price Target Upside: 37.80% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 2

Target Hospitality's overall score reflects its solid financial performance, strategic management, and valuation appeal. Key strengths include strong cash flow, a healthy balance sheet, and strategic growth initiatives. However, recent challenges in the government segment and bearish technical indicators temper the outlook. Despite these challenges, the company's steps towards diversification and debt reduction support a positive long-term view.

Positive Factors

Financial Outlook

Target reiterated its 2024 revenue/adjusted EBITDA guidance ranges, indicating confidence in its financial outlook.

Financial Performance

Target Hospitality's 3Q24 total revenue of $95.2M and adjusted EBITDA of $49.7M exceeded expectations.

Negative Factors

Contract Termination

Target Hospitality received a notice from the U.S. government terminating the existing service agreement for the Pecos Children's Center.

EBITDA Impact

The Pecos Contract accounts for roughly 70-75% of the projected 2025 EBITDA forecast.

Target Hospitality Business Overview & Revenue Model

Company Description

Target Hospitality Corp. operates as a specialty rental and hospitality services company in North America. The company operates through four segments: Hospitality & Facilities Services - South, Hospitality & Facilities Services - Midwest, Government, and TCPL Keystone. It owns a network of specialty rental accommodation units with approximately 15,528 beds across 27 communities, which include 26 owned and 1 leased; and operates 1 community not owned or leased by the company. Target Hospitality Corp. also provides catering and food, maintenance, housekeeping, grounds-keeping, security, health and recreation, workforce community management, concierge, and laundry services. It serves the U.S. government, government contractors, investment grade natural resource development companies, and energy infrastructure companies. The company was founded in 1978 and is headquartered in The Woodlands, Texas.

How the Company Makes Money

Target Hospitality makes money through a diversified revenue model centered on providing turnkey accommodations and related services. Key revenue streams include rental income from specialty modular units and lodges, service fees for catering and hospitality management, and long-term contracts with governmental and corporate clients. The company's earnings are bolstered by strategic partnerships with major players in the energy and natural resources sectors, as well as government agencies requiring scalable and flexible lodging solutions. These partnerships often result in multi-year contracts, providing a stable and predictable revenue stream. Additionally, Target Hospitality leverages its expertise in remote site operations to offer premium services that command higher margins, further enhancing its profitability.

Target Hospitality Financial Statement Overview

Summary

Target Hospitality exhibits commendable financial health, characterized by strong profitability, stable financial structure, and excellent cash flow management. The company's ability to maintain high margins and generate significant cash flows despite revenue fluctuations underscores its operational efficiency and financial resilience. Potential risks are mitigated by effective debt management and a strong equity base.

Income Statement

Target Hospitality demonstrates robust profitability with a TTM gross profit margin of 45.05% and a net profit margin of 18.46%. The company also shows strong EBIT and EBITDA margins at 28.16% and 40.74% respectively. Despite a decrease in revenue from the previous year, the company maintains healthy margins, indicating efficient cost management and operational effectiveness.

Balance Sheet

The balance sheet reflects a solid equity position with an equity ratio of 58.01% and a manageable debt-to-equity ratio of 0.43, suggesting financial stability. Return on equity stands at a strong 16.93%, indicating effective use of equity. The company has successfully reduced its net debt, enhancing its financial flexibility and reducing leverage-related risks.

Cash Flow

Target Hospitality's cash flow performance is strong, with a substantial operating cash flow to net income ratio of 2.13, indicating excellent cash conversion efficiency. The free cash flow to net income ratio is also robust at 1.79, supported by a notable free cash flow growth. This displays the company's strong cash-generating ability, enabling reinvestment and debt reduction.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
386.27M	563.61M	501.99M	291.34M	225.15M
	Gross Profit
178.18M	313.32M	247.13M	101.35M	57.16M
	EBIT
108.78M	240.61M	174.37M	37.10M	4.10M
	EBITDA
125.10M	332.62M	224.29M	106.35M	68.11M
	Net Income Common Stockholders
71.27M	173.70M	73.94M	-4.58M	-27.48M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
190.67M	103.93M	181.67M	23.41M	6.98M
	Total Assets
725.77M	694.35M	771.73M	513.39M	534.24M
	Total Debt
209.65M	200.83M	342.50M	330.21M	374.50M
	Net Debt
18.98M	96.90M	160.83M	306.81M	367.52M
	Total Liabilities
304.68M	317.05M	570.88M	416.12M	434.82M
	Stockholders Equity
421.08M	377.31M	200.85M	97.27M	99.42M
Cash Flow		Free Cash Flow
151.68M	88.38M	185.32M	69.11M	34.60M
	Operating Cash Flow
151.68M	156.80M	305.61M	104.60M	46.78M
	Investing Cash Flow
-28.84M	-68.18M	-140.23M	-35.91M	-10.95M
	Financing Cash Flow
-36.06M	-166.37M	-7.10M	-52.27M	-35.68M

Target Hospitality Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 6.35
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TH, the sentiment is Negative. The current price of 6.35 is below the 20-day moving average (MA) of 6.62, below the 50-day MA of 6.57, and below the 200-day MA of 8.41, indicating a bearish trend. The MACD of -0.04 indicates Positive momentum. The RSI at 45.15 is Neutral, neither overbought nor oversold. The STOCH value of 13.52 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TH.

Target Hospitality Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TH	74 Outperform	$627.46M	9.03	17.85%	―	-31.46%	-56.72%
TRNS	72 Outperform	$792.52M	45.92	6.78%	―	8.60%	42.67%
AMRC	68 Neutral	$565.49M	10.11	5.92%	―	28.76%	-9.56%
LXFR	64 Neutral	$274.69M	14.60	8.47%	5.19%	-3.23%	―
Sector *	63 Neutral	$4.27B	11.40	5.38%	214.63%	4.11%	-8.98%
CVEO	52 Neutral	$272.89M	19.41	-6.13%	4.96%	-2.67%	-160.35%
RDW	45 Neutral	$863.32M	―	-451.56%	―	24.73%	-219.97%

Target Hospitality Corporate Events

Target Hospitality Amends Credit Agreement and Updates Executive Compensation

In February 2025, Target Hospitality Corp. and its subsidiaries amended their ABL Credit Agreement to adjust the maturity provisions related to their 2025 Senior Secured Notes, extending the maturity date to March 31, 2025. This adjustment is part of their financial strategy to manage debt obligations effectively. Additionally, the company introduced new executive stock unit agreements under its 2019 Incentive Plan, contingent on shareholder approval. These agreements aim to retain and incentivize key executives, with performance-based vesting linked to share price targets, reflecting a strategic focus on aligning executive compensation with shareholder value.

Target Hospitality’s Pecos Center Contract Terminated

On February 24, 2025, Target Hospitality announced the termination of its Pecos Children’s Center services agreement by its nonprofit partner, effective February 21, 2025. This led to the withdrawal of its preliminary 2025 financial outlook. Despite the contract termination, Target plans to re-market its modular assets and pursue growth opportunities, particularly in supporting U.S. government immigration policies.

Target Hospitality Announces Major Workforce Housing Agreement

On February 18, 2025, Target Hospitality announced a multi-year agreement with Lithium Americas Corp. to construct and manage a workforce housing community near the Thacker Pass Project in Nevada. This project is expected to generate approximately $140 million in revenue over its initial term and supports Target’s strategic diversification and regional expansion efforts, enhancing its business fundamentals and financial outlook for 2025.