What a time it’s been for Liberty Energy. In the past six months alone, the company’s stock price has increased by a massive 130%, reaching $28.43 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is it too late to buy LBRT? Find out in our full research report, it’s free.

Why Does LBRT Stock Spark Debate?

Operating approximately 40 active fleets across North America's most productive shale basins, Liberty Energy (NYSE: LBRT) provides hydraulic fracturing services that help oil and gas companies extract resources from shale formations.

Two Positive Attributes:

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term performance can give signals about its business quality. Even a bad business, especially in a cyclical industry, can shine for a year or so, but a top-tier one should exhibit resilience through cycles. Over the last five years, Liberty Energy grew its sales at an incredible 32.9% compounded annual growth rate. Its growth surpassed the average energy upstream and integrated energy company and shows its offerings resonate with customers.

2. EBITDA Margin Rising, Profits Up

Adjusted EBITDA margin is an important measure of profitability for the sector and accounts for the gross margins and operating costs mentioned previously. Unlike operating margin, it is not distorted by accounting conventions around reserves, drilling costs, and assumptions on commodity consumption from the well or basin. Adjusted EBITDA highlights the economic reality of how much cash the rock produces before the capital structure (debt service) and the drilling budget (capex) are considered.

Liberty Energy’s EBITDA margin rose by 10.9 percentage points over the last year, as its sales growth gave it immense operating leverage. Its EBITDA margin for the trailing 12 months was 15.8%.

One Reason to be Careful:

Low Gross Margin Reveals Weak Structural Profitability

In any given year, energy gross margins are heavily influenced by prices, hedging, and cost inflation, but over a full cycle these gross margins reveal which producers are structurally advantaged through superior “rock” quality, infrastructure access, and cost position.

Liberty Energy, which averaged 23.2% gross margin over the last five years, exhibiting bottom-tier unit economics in the sector. It means the company will struggle at higher commodity prices than peers with better gross margins.

Final Judgment

Liberty Energy’s positive characteristics outweigh the negatives, and with the recent rally, the stock trades at 11× forward EV-to-EBITDA (or $28.43 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

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