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Target Hospitality Corp (TH)
NASDAQ:TH
US Market

Target Hospitality (TH) AI Stock Analysis

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TH

Target Hospitality

(NASDAQ:TH)

Rating:78Outperform
Price Target:
$8.50
▲( 15.33% Upside)
Target Hospitality scores well due to its strong financial performance, characterized by robust profitability and excellent cash flow management. The technical analysis supports a positive momentum, although caution is warranted due to potential overbought conditions. Valuation is adequate, with a reasonable P/E ratio. The earnings call provides a balanced view with significant contract wins offset by some revenue decline challenges. Overall, the stock is positioned well for growth, with a few cautionary elements to monitor.
Positive Factors
Business Opportunities
There is potential for the assets to be redeployed with ICE to service needs at the border.
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.
Financial Impact
The Pecos Contract accounts for roughly 70-75% of the projected 2025 EBITDA forecast.

Target Hospitality (TH) vs. SPDR S&P 500 ETF (SPY)

Target Hospitality Business Overview & Revenue Model

Company DescriptionTarget 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 MoneyTarget 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
85
Very Positive
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
78
Positive
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
82
Very Positive
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 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
386.27M563.61M501.99M291.34M225.15M
Gross Profit
178.18M313.32M247.13M101.35M57.16M
EBIT
108.78M240.61M174.37M37.10M4.10M
EBITDA
125.10M332.62M224.29M106.35M68.11M
Net Income Common Stockholders
71.27M173.70M73.94M-4.58M-27.48M
Balance SheetCash, Cash Equivalents and Short-Term Investments
190.67M103.93M181.67M23.41M6.98M
Total Assets
725.77M694.35M771.73M513.39M534.24M
Total Debt
209.65M200.83M342.50M330.21M374.50M
Net Debt
18.98M96.90M160.83M306.81M367.52M
Total Liabilities
304.68M317.05M570.88M416.12M434.82M
Stockholders Equity
421.08M377.31M200.85M97.27M99.42M
Cash FlowFree Cash Flow
151.68M88.38M185.32M69.11M34.60M
Operating Cash Flow
151.68M156.80M305.61M104.60M46.78M
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
Neutral
Last Price7.37
Price Trends
50DMA
6.68
Positive
100DMA
7.61
Negative
200DMA
8.20
Negative
Market Momentum
MACD
0.18
Negative
RSI
58.24
Neutral
STOCH
83.67
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TH, the sentiment is Neutral. The current price of 7.37 is above the 20-day moving average (MA) of 7.05, above the 50-day MA of 6.68, and below the 200-day MA of 8.20, indicating a neutral trend. The MACD of 0.18 indicates Negative momentum. The RSI at 58.24 is Neutral, neither overbought nor oversold. The STOCH value of 83.67 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TH.

Target Hospitality Risk Analysis

Target Hospitality disclosed 40 risk factors in its most recent earnings report. Target Hospitality reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Target Hospitality Peers Comparison

Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
THTH
78
Outperform
$755.17M17.3311.23%-33.11%-68.55%
72
Outperform
$718.04M13.455.64%30.13%-7.60%
71
Outperform
$305.32M14.229.61%4.47%1.63%7162.39%
68
Neutral
$853.03M58.515.67%8.60%42.67%
64
Neutral
$4.39B11.815.20%249.38%3.96%-12.36%
58
Neutral
$281.17M19.41-8.41%4.82%-5.62%-175.97%
RDRDW
51
Neutral
$979.73M-451.56%1.36%-213.86%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TH
Target Hospitality
7.37
-3.98
-35.07%
AMRC
Ameresco
13.65
-20.31
-59.81%
TRNS
Transcat
91.32
-43.19
-32.11%
LXFR
Luxfer
11.18
-0.46
-3.95%
CVEO
Civeo
20.88
-2.62
-11.15%
RDW
Redwire
13.00
7.97
158.45%

Target Hospitality Earnings Call Summary

Earnings Call Date:May 19, 2025
(Q1-2025)
|
% Change Since: 3.80%|
Next Earnings Date:Aug 06, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong contract announcements and steady customer loyalty, but faced challenges in government revenue declines and carrying costs. The positive prospects in both commercial and government segments, along with a strong liquidity position, balance the negative aspects.
Q1-2025 Updates
Positive Updates
Multi-Year Contracts Announced
Target Hospitality announced two multi-year contracts expected to generate over $380 million in revenue, showcasing strength in both commercial and government end markets.
Strong Customer Renewal Rate
The HFS segment continues to benefit from a consistent 90% customer renewal rate since 2015, illustrating the value proposition of Target's network.
Government Segment Opportunities
Target's government segment is poised for growth with opportunities tied to the current administration's immigration initiatives and the reactivation of the Dilley, Texas facility.
Workforce Hub Contract Progress
The Workforce Hub contract is progressing on schedule, contributing $5 million in Q1 with an expected $65 million in total construction revenue for 2025.
Strong Liquidity Position
Target ended the quarter with $35 million in cash and $169 million in total liquidity, with a net leverage ratio of 0.1 times.
Negative Updates
Government Revenue Decline
Government segment revenue decreased to $26 million due to the termination of the PCC contract and the South Texas Family Residential Center contract.
Carrying Costs for Idle Assets
Maintaining West Texas assets in a ready state will incur carrying costs of $2 million to $3 million per quarter.
Lower Margin Contribution Expected
The phased reopening of the Dilley facility will result in lower margin contribution through Q3 2025.
Company Guidance
During the first quarter of 2025, Target Hospitality provided guidance indicating strong business fundamentals and a promising growth pipeline. The company announced two multi-year contracts projected to generate over $380 million in revenue in the coming years, demonstrating their ability to support both commercial and government initiatives. The HFS segment showcased a consistent 90% renewal rate since 2015, and the government segment highlighted the reactivation of the Dilley, Texas facility, expected to contribute $30 million in revenue for 2025. Financially, Target Hospitality reported total revenue of approximately $70 million and adjusted EBITDA of $22 million for the first quarter. The company maintained a strong balance sheet with $35 million in cash and $169 million in total liquidity. Looking ahead, Target reiterated its 2025 financial outlook, anticipating total revenue between $265 million and $285 million and adjusted EBITDA between $47 million and $57 million, underlining a focus on strategic growth and diversification across end markets.

Target Hospitality Corporate Events

Executive/Board ChangesShareholder Meetings
Target Hospitality Holds 2025 Annual Stockholder Meeting
Neutral
May 22, 2025

On May 22, 2025, Target Hospitality Corp. held its 2025 Annual Meeting of Stockholders where several key proposals were voted on. The stockholders elected directors, ratified the appointment of Ernst & Young LLP as the independent auditor, approved executive compensation, and amended the Incentive Plan to increase the number of shares authorized for issuance. Additionally, restricted stock units were awarded to non-employee directors.

The most recent analyst rating on (TH) stock is a Hold with a $9.50 price target. To see the full list of analyst forecasts on Target Hospitality stock, see the TH Stock Forecast page.

Business Operations and StrategyRegulatory Filings and Compliance
Target Hospitality Releases Investor Presentation
Neutral
May 6, 2025

On May 6, 2025, Target Hospitality Corp. released an investor presentation on its website. The presentation includes forward-looking statements, which are subject to cautionary statements, and is not considered filed under the Securities Exchange Act of 1934.

Executive/Board ChangesPrivate Placements and FinancingBusiness Operations and Strategy
Target Hospitality Amends Credit Agreement and Updates Executive Compensation
Neutral
Feb 28, 2025

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.

Business Operations and StrategyFinancial Disclosures
Target Hospitality’s Pecos Center Contract Terminated
Negative
Feb 24, 2025

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.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.