Value
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 0.5 |
| P/S | 6.8 |
| EV/EBITDA | 4.4 |
| Fwd P/E | 5.6 |
| PEG | 10.0 |
| Analyst target | 6.0 |
- ▸Forward P/E: 22.9x
- ▸PEG: 0.08
KGS · Why this verdict
Why Kodiak Gas Services (KGS) 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 score5.4/10
ConfidenceHIGH
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
With 82.8% of revenues tied to the Permian Basin and Eagle Ford Shale, and a limited number of key vendors, the company is exposed to disruptions in those specific geographies or supply chains — two high-severity and one medium-severity concentration risks identified in annual disclosures. Bear case | Geographic revenue concentration falls below 70% within 4 quarters as the customer base broadens beyond the two primary basins. | →Stable |
| CounterDominant positioning in high-activity shale basins may reflect competitive advantage rather than fragility; deep expertise in those basins can support pricing power and contract renewal rates. | ||
Only 3.3% of headroom remains to the analyst price target while the downside to the stop level is more than twice as large, producing a risk/reward ratio well below a threshold that justifies new capital deployment. Warnings | Analyst consensus price target rises above $80, opening more than 15% upside from current levels and restoring favorable asymmetry. | →Stable |
| CounterIf the company delivers additional earnings beats and analysts revise targets upward, the 3.3% upside could expand quickly without any change in the current price. | ||
The company converts free cash flow at 224% relative to net income — meaning cash generation substantially exceeds reported earnings — a quality signal that the underlying business is more cash-generative than the income statement alone implies. Quality breakdown | Free cash flow as a percentage of net income stays above 150% for 2 consecutive quarters, confirming the conversion quality is structural rather than one-time. | →Stable |
| CounterEven high cash conversion provides limited protection when the earnings base itself is volatile; two consecutive large misses indicate the operating results underlying that conversion are difficult to forecast. | ||
Two consecutive large misses — 34% and 70% below consensus in the November 2025 and February 2026 quarters — before a partial recovery in the most recent quarter reflect a business where results are difficult to forecast and guidance credibility is low. Earnings | EPS surprise stays above 5% for 3 consecutive quarters, demonstrating the miss cycle was transient rather than structural. | →Stable |
| CounterThe most recent quarter beat by 9.5%, suggesting the trough may be behind the company; sequential improvement over the next 2 to 4 quarters could rehabilitate the earnings track record. | ||
With 82.8% of revenues tied to the Permian Basin and Eagle Ford Shale, and a limited number of key vendors, the company is exposed to disruptions in those specific geographies or supply chains — two high-severity and one medium-severity concentration risks identified in annual disclosures.
→StableBear case
- Expectation
- Geographic revenue concentration falls below 70% within 4 quarters as the customer base broadens beyond the two primary basins.
CounterDominant positioning in high-activity shale basins may reflect competitive advantage rather than fragility; deep expertise in those basins can support pricing power and contract renewal rates.
Only 3.3% of headroom remains to the analyst price target while the downside to the stop level is more than twice as large, producing a risk/reward ratio well below a threshold that justifies new capital deployment.
→StableWarnings
- Expectation
- Analyst consensus price target rises above $80, opening more than 15% upside from current levels and restoring favorable asymmetry.
CounterIf the company delivers additional earnings beats and analysts revise targets upward, the 3.3% upside could expand quickly without any change in the current price.
The company converts free cash flow at 224% relative to net income — meaning cash generation substantially exceeds reported earnings — a quality signal that the underlying business is more cash-generative than the income statement alone implies.
→StableQuality breakdown
- Expectation
- Free cash flow as a percentage of net income stays above 150% for 2 consecutive quarters, confirming the conversion quality is structural rather than one-time.
CounterEven high cash conversion provides limited protection when the earnings base itself is volatile; two consecutive large misses indicate the operating results underlying that conversion are difficult to forecast.
Two consecutive large misses — 34% and 70% below consensus in the November 2025 and February 2026 quarters — before a partial recovery in the most recent quarter reflect a business where results are difficult to forecast and guidance credibility is low.
→StableEarnings
- Expectation
- EPS surprise stays above 5% for 3 consecutive quarters, demonstrating the miss cycle was transient rather than structural.
CounterThe most recent quarter beat by 9.5%, suggesting the trough may be behind the company; sequential improvement over the next 2 to 4 quarters could rehabilitate the earnings track record.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Kodiak Gas Services generates exceptional free cash flow relative to earnings and maintains solid technical positioning, but two consecutive large earnings misses, heavy geographic concentration in two shale basins covering 82.8% of revenues, and only 3.3% upside to the analyst target combine to support a cautious, position-reducing stance.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 1.8 |
| ROA | 4.0 |
| Gross margin | 8.8 |
| Op margin | 10.0 |
| Net margin | 2.6 |
| Current ratio | 4.8 |
| FCF quality | 10.0 |
| Moat | 5.2 |
| Piotroski F | 7.8 |
- ▸Excellent cash conversion: 224% FCF/NI
- ▸No competitive moat
- ▸Strong Piotroski F-Score: 7/9
Growth
6.8/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.7 |
| EPS growth | 10.0 |
Momentum
2.6/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 4.0 |
| Volume | 2.6 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
7.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 8.6 |
| Price target | 8.3 |
| erm sentiment | 4.5 |
- ▸Analyst upside: 27%
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.0 |
- ▸Negligible insider selling — $255,054 (0.004% of mkt cap)
Peer rank
2.4/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 0.9 |
| quality rank | 3.8 |
| growth rank | 5.0 |
Technical
7.9/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 7.7 |
| support resistance | 8.9 |
| 52w position | 7.1 |
Risk (lower is worse)
5.1/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 5.7 |
| days to cover | 7.2 |
| volatility | 0.5 |
| put call | 9.1 |
| implied vol | 2.5 |
| beta | 8.1 |
| debt equity | 2.6 |
- ▸High IV: 65%
- ▸Concentration risks: 2 HIGH, 1 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
3.5/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 4.2 |
- ▸Earnings concerns: 2B/2M
- ▸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 (6)
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:30d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:2.6<4.5
- ASYMMETRY:1.1<1.5@spot
Warning (0)
none
Reward-to-Risk
1.09
Upside
+10.4%
Downside
9.6%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 3.9 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Technical at 7.9) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:2.6<4.5, ASYMMETRY:1.1<1.5@spot) reinforce the read. Current asymmetry R:R is 1.09 — supplementary context, not the trigger for this path.
The strongest dimensions are Technical at 7.9, Sentiment at 7.4, and Growth at 6.8; the weakest are Peer rank at 2.4, Momentum at 2.6, and Catalyst at 3.5. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of 1.09 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Exceptional Free Cash Conversion
Trip ifFree cash flow as a percentage of net income falls below 100% for 2 consecutive quarters.
- P2Geographic Supplier Concentration
Trip ifGeographic revenue concentration falls below 70% for 2 consecutive quarters.
- P3Erratic Earnings History
Trip ifEPS surprise stays above 5% for 3 consecutive quarters.
- P4Thin Upside Unfavorable Risk Reward
Trip ifAnalyst consensus price target rises above $80, opening more than 15% upside from current levels.