This is another smaller cap company that offers solid upside potential for more aggressive investors. Fairmount Santrol Holdings Inc. (NYSE: FMSA) provides sand-based proppant solutions for exploration and production companies to enhance the productivity of their oil and gas wells.
The company operates in two segments. The Proppant Solutions segment primarily provides sand-based proppants for use in hydraulic fracturing operations in the United States, Canada, Argentina, Mexico, China, Northern Europe and the United Arab Emirates. The company’s products include northern white frac sand, API-spec brown sand, and resin coated proppants, as well as ceramic proppants; PowerProp product; and Propel SSP product that utilizes a polymer coating applied to a proppant substrate.
The Industrial & Recreational Products segment offers raw, coated, and custom blended sands for use in building products, glass, turf and landscape, and filtration industries, as well as for foundries primarily in North America. Fairmount Santrol also supplies proppants to oilfield service companies.
RBC has set its price target at a huge $6, but the posted consensus target is even higher at $7.25. The shares closed Monday at $2.92 but traded lower early Tuesday on a competitor’s earnings miss.
U.S. Silica Holdings
This is another company that has been absolutely smoked recently and has awesome upside potential. U.S. Silica Holdings Inc. (NYSE: SLCA) is a leading producer of commercial silica used in the oil and gas industry, as well as in a wide range of industrial applications. Over its 115-year history, U.S. Silica has developed core competencies in mining, processing, logistics and materials science that enable it to produce and cost-effectively deliver more than 260 products to the firm’s customers across all end markets.
The company currently operates nine industrial sand production plants and eight oil and gas sand production plants. With the price of oil stabilizing, many of the short-sellers that targeted the frac sand companies may be starting to cover their positions.
The company reported second-quarter results that missed estimates and lowered forward estimates. However, many of the metrics in the report were positive, and the lowered estimates are in part due to higher capital expenditure guidance for 2017. While it is knocking the sand group down, it may be providing investors an even better entry point as oil looks poised to move back over $50.
U.S. Silica shareholders are paid a 0.9% distribution. The RBC price target is $55. The consensus target is $52.14, and the stock closed Monday at $29.13.
While it is entirely possible that oil stays range bound, breaking the $50 level for West Texas Intermediate could be a psychological lift for the stocks and investor confidence. Plus, any major disruption in oil production from a global macro event and we could see a spike in pricing, and that could boost shares as well.