Value
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 6.1 |
| P/S | 7.2 |
| EV/EBITDA | 5.4 |
| Fwd P/E | 7.6 |
| PEG | 4.8 |
| Analyst target | 4.0 |
- ▸Forward P/E: 16.3x
- ▸PEG: 1.74
AROC · Why this verdict
Why Archrock (AROC) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.5/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Archrock shows peer-group-leading 21% margins and strong technical momentum, but the stock has essentially reached the analyst consensus target with just 0.4% upside remaining, the risk/reward stands at nearly zero, the dividend appears potentially uncovered, and free cash flow converts at only 46% of net income despite strong reported margins — the setup favors patience over new capital deployment.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Approximately 85% of revenue derives from contract compression operations, concentrated in the Permian and Eagle Ford basins; any sustained decline in drilling and completion activity in those specific basins would reduce utilization and pricing with limited offset from other business lines. Bear case | Contract operations revenue stays at or above 80% of total revenue over the next 12 months without a meaningful disruption to activity levels in those two basins. | →Stable |
| CounterConcentration in those two basins may reflect where the most durable demand for compression services resides; if activity levels in that footprint remain healthy, the concentration translates into full asset utilization rather than a structural vulnerability. | ||
The dividend yield is elevated but flagged as potentially uncovered, and free cash flow is converting at only 46% of net income despite a 21% operating margin — a divergence between reported earnings and actual cash generation that raises questions about the sustainability of the current distribution. Catalyst breakdown | Free cash flow conversion rises above 80% of net income for 2 consecutive quarters, providing adequate coverage for the dividend and resolving the safety concern. | →Stable |
| CounterA high yield can attract income-oriented buyers who provide a price floor; if the dividend is maintained even under pressure, the support bid may limit downside beyond what the coverage concern alone would imply. | ||
The stock sits just below the analyst consensus target of $36.44 with only 0.4% headroom remaining, producing a risk/reward ratio of roughly 0.07-to-1; the current entry provides no meaningful reward relative to the downside carried by the position. Price targets | Analyst consensus targets are revised upward by more than 15% within the next 12 months, creating meaningful room to the upside before adding exposure. | →Stable |
| CounterAnalyst targets are a lagging indicator; strong momentum and operational execution could prompt a round of upward revisions that restores an attractive risk/reward setup without requiring a price pullback. | ||
The momentum score is well above the passing threshold, MACD is expanding, and on-balance volume is rising with the stock above its 200-day moving average — a constructive technical picture for existing holders, though price has already converged with the analyst target. Momentum breakdown | Momentum remains above the passing threshold and the stock holds above its 200-day moving average for the next 6 months. | →Stable |
| CounterStrong technical momentum with 0.4% remaining upside to the analyst target means continuation of the move requires a fundamental re-rating; without a catalyst to lift consensus estimates, momentum that has already closed the gap to fair value can stall or reverse sharply. | ||
Approximately 85% of revenue derives from contract compression operations, concentrated in the Permian and Eagle Ford basins; any sustained decline in drilling and completion activity in those specific basins would reduce utilization and pricing with limited offset from other business lines.
→StableBear case
- Expectation
- Contract operations revenue stays at or above 80% of total revenue over the next 12 months without a meaningful disruption to activity levels in those two basins.
CounterConcentration in those two basins may reflect where the most durable demand for compression services resides; if activity levels in that footprint remain healthy, the concentration translates into full asset utilization rather than a structural vulnerability.
The dividend yield is elevated but flagged as potentially uncovered, and free cash flow is converting at only 46% of net income despite a 21% operating margin — a divergence between reported earnings and actual cash generation that raises questions about the sustainability of the current distribution.
→StableCatalyst breakdown
- Expectation
- Free cash flow conversion rises above 80% of net income for 2 consecutive quarters, providing adequate coverage for the dividend and resolving the safety concern.
CounterA high yield can attract income-oriented buyers who provide a price floor; if the dividend is maintained even under pressure, the support bid may limit downside beyond what the coverage concern alone would imply.
The stock sits just below the analyst consensus target of $36.44 with only 0.4% headroom remaining, producing a risk/reward ratio of roughly 0.07-to-1; the current entry provides no meaningful reward relative to the downside carried by the position.
→StablePrice targets
- Expectation
- Analyst consensus targets are revised upward by more than 15% within the next 12 months, creating meaningful room to the upside before adding exposure.
CounterAnalyst targets are a lagging indicator; strong momentum and operational execution could prompt a round of upward revisions that restores an attractive risk/reward setup without requiring a price pullback.
The momentum score is well above the passing threshold, MACD is expanding, and on-balance volume is rising with the stock above its 200-day moving average — a constructive technical picture for existing holders, though price has already converged with the analyst target.
→StableMomentum breakdown
- Expectation
- Momentum remains above the passing threshold and the stock holds above its 200-day moving average for the next 6 months.
CounterStrong technical momentum with 0.4% remaining upside to the analyst target means continuation of the move requires a fundamental re-rating; without a catalyst to lift consensus estimates, momentum that has already closed the gap to fair value can stall or reverse sharply.
Per-dimension breakdown
Quality
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 7.6 |
| ROA | 5.8 |
| Gross margin | 9.3 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 5.2 |
| FCF quality | 3.7 |
| Moat | 6.9 |
| Rule of 40 | 3.0 |
| Piotroski F | 7.8 |
- ▸Strong margins: 21%
- ▸Earnings quality RED FLAG: 46% FCF/NI
- ▸Rule of 40: 17 (fail)
- ▸Strong Piotroski F-Score: 7/9
Growth
3.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 4.4 |
| EPS growth | 2.5 |
Momentum
8.1/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.2 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 10.0 |
| vol acceleration | 5.5 |
- ▸Overbought (RSI 77)
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.0 |
| Analyst rating | 8.0 |
| Price target | 6.3 |
- ▸Light analyst coverage (9.0) — signal dampened
Insider
3.4/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 3.0 |
| insider conviction | 2.0 |
| holder change | 5.1 |
- ▸Notable insider selling — $11,861,703 (0.173% of mkt cap)
Peer rank
4.6/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 3.6 |
| quality rank | 8.6 |
| growth rank | 6.2 |
- ▸Best-in-class margins
Technical
4.2/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.3 |
| support resistance | 1.2 |
| 52w position | 9.5 |
| gap | 6.0 |
Risk (lower is worse)
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.3 |
| days to cover | 7.0 |
| volatility | 4.9 |
| put call | 9.4 |
| implied vol | 5.3 |
| beta | 7.8 |
| debt equity | 3.9 |
- ▸Concentration risks: 2 HIGH, 1 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 9.5 |
| dividend safety | 4.8 |
| news activity | 5.0 |
- ▸Yield trap warning: high yield but unsafe
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (5)
- MOMENTUM:8.1>=5.5
- INSIDER:OK
- EARNINGS_PROXIMITY:40d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.3=NEGATIVE
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-0.34
Upside
-5.1%
Downside
15.0%
Sizing output
AVOID
SetupUNKNOWN — No clear chart pattern; technical signals are mixed
EdgeNO_EDGE — No clear edge identified
SuitabilityMODERATE — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 4.5 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Momentum at 8.1) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-0.3=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.34 — supplementary context, not the trigger for this path.
The strongest dimensions are Momentum at 8.1, Quality at 6.9, and Sentiment at 6.9; the weakest are Insider at 3.4, Growth at 3.5, and Technical at 4.2. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of -0.34 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1The stock sits just below the analyst consensus target of $36.44 with only 0.4% headroom remaining, producing a risk/reward ratio of roughly 0.07-to-1; the current entry provides no meaningful reward relative to the downside carried by the position.
Trip ifAnalyst consensus price target rises above $42, creating more than 15% upside from current levels.
- P2The dividend yield is elevated but flagged as potentially uncovered, and free cash flow is converting at only 46% of net income despite a 21% operating margin — a divergence between reported earnings and actual cash generation that raises questions about the sustainability of the current distribution.
Trip ifFree cash flow conversion rises above 80% of net income for 2 consecutive quarters.
- P3Approximately 85% of revenue derives from contract compression operations, concentrated in the Permian and Eagle Ford basins; any sustained decline in drilling and completion activity in those specific basins would reduce utilization and pricing with limited offset from other business lines.
Trip ifContract operations revenue falls below 70% of total revenue for 2 consecutive quarters.
- P4The momentum score is well above the passing threshold, MACD is expanding, and on-balance volume is rising with the stock above its 200-day moving average — a constructive technical picture for existing holders, though price has already converged with the analyst target.
Trip ifMomentum score falls below 5.5 or the stock closes below the 200-day moving average for 3 consecutive weeks.