Enerflex (TSX:EFX) Could Be 25% Undervalued As Data Center Contract Lifts Backlog

Enerflex (TSX:EFX) just secured a large Engineered Systems contract tied to a North American data center project, pushing its behind the meter natural gas-fired power generation backlog above 1.75 gigawatts.

Enerflex’s latest contract win comes on top of a strong run in the shares, with a 30 day share price return of 12.77% and a year to date share price gain of 61.24%, supported by a very large 3 year total shareholder return of more than 5x. This performance suggests that investors are pricing in stronger growth prospects and a different risk profile than a few years ago.

Scan beyond Enerflex and this data center power push by checking out a curated set of 41 power grid technology and infrastructure stocks that is geared to the same long-term infrastructure theme.

Bulls see Enerflex as a reshaped power supplier to data centers, while bears see a cyclical energy contractor after a big run. Which story fits the current valuation workup that follows?

Most Popular Enerflex Narrative: 25% Undervalued

Enerflex’s most followed valuation story pegs fair value at about CA$46.94 per share, compared with the recent CA$35.23 close, which implies a sizeable gap that the market has not closed yet. That gap rests on a detailed view of recurring energy infrastructure work, higher service mix, and a changing risk profile tied to contracts like the new data center award.

Strategic investments in expanding the high-margin, recurring After-Market Services and Energy Infrastructure businesses, which contribute 65% of gross margin, are expected to improve earnings stability and net margins over time as these segments continue to outperform. Ongoing operational efficiency initiatives and realization of integration synergies, evident in lower SG&A and a drop in net debt-to-EBITDA to 1.3x, enhance free cash flow, lighten the balance sheet, and create capacity to reinvest in growth or return capital to shareholders, supporting future earnings and net margin improvement.

See why 8 investors see Enerflex as 25% undervalued.

Result: Fair Value of CA$46.94 (UNDERVALUED)

Still, this Enerflex setup can be knocked off course if natural gas demand weakens or if leadership uncertainty around the interim CEO and CFO hampers execution.

Find out about the key risks to this Enerflex narrative.

Another View: What Enerflex’s P/E Is Telling You

That 25% upside story runs into a very different message from the market multiple. Enerflex trades on a P/E of 57.3x, compared with a North American Energy Services average of 18.8x and a fair ratio estimate of 21.5x. That gap points to rich expectations. Is the growth narrative strong enough to keep them in place?

For a closer look at how this pricing stacks up against the underlying numbers, including what the fair ratio suggests the market could move toward, See what the numbers say about this price — find out in our valuation breakdown..

Next Steps

If the split view on Enerflex leaves you unsure, act quickly to review the underlying data for yourself, then weigh the 3 key rewards and 2 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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