$22.20
$57.40
bear $22.20
base $43.50
bull $57.40
margin of safety $23.00
market price* $61.71
Cactus designs, makes, sells and rents wellheads and pressure-control equipment, and (through its FlexSteel brand, acquired February 28, 2023) spoolable pipe, mainly for onshore oil and gas wells in the United States. In 2025, 76% of revenue came from product sales, 8% from rentals and 16% from field service. Demand follows the number of wells drilled and completed, so earnings rise and fall with drilling activity. One customer was 17% of 2025 revenue (15% in 2024, 10% in 2023). How we measure earnings. We start from cash generated by operations, remove swings in receivables, inventory and payables, subtract stock compensation as a real cost, and subtract the part of capital spending needed to keep the business running (spending to support growth is not charged). Payments to former pre-IPO owners under the tax receivable agreement (about $20 million in 2025) are treated as a real cost and stay in. Per-share figures count both Class A shares and the Class B shares that can be exchanged for them, because the cash flows belong to both. On this basis owner earnings per share were about $2.04 (2019), $0.95 (2020), $1.20 (2021), $2.37 (2022), $3.35 (2023), $3.01 (2024) and $3.06 (2025). The 2025 figure was 1.4% above 2024. As a cross-check, net income plus depreciation and other non-cash charges less maintenance capital spending came to about $289.7 million for 2025, versus $269.6 million from the cash-flow build; the whole gap is the roughly $20 million of tax receivable agreement payments, which the second method does not capture. Level used. We use the median of 2019-2025, about $2.37 per share, because it spans the 2020 downturn and the 2022-2025 upswing. Drilling-linked businesses need a full cycle, and the recent $3.0-3.4 years alone would flatter the level. This is deliberately below the last three years, even though the business is larger since the FlexSteel deal. No growth is credited in the base case: year 1 assumes no growth versus 1.4% actual in 2025, since 2025 revenue fell 4.5% on lower rig counts. The earnings level is treated as lasting because oilfield wellhead and pipe demand has produced positive owner earnings every year since 2019, including 2020. Amortization of acquired intangibles (about $16 million in 2024 in the spoolable segment) is a non-cash charge that is added back; because we hold the level flat and credit no growth, we are not treating those acquired assets as a source of rising earnings. What changed on January 1, 2026. Cactus bought 65% of Baker Hughes Pressure Control LLC, Baker Hughes' former surface pressure control business, for $344.5 million in cash, with a further $10.0 million due on the first anniversary and $14.5 million when Baker Hughes leaves the venture. First-half 2026 revenue was $837.9 million versus $553.9 million a year earlier, but operating income rose only from $129.4 million to $133.1 million, and first-half cash flow from operations included large working-capital inflows, including a $114.8 million increase in accounts payable, that make it hard to read. Two quarters is not enough to establish what the venture earns for shareholders, so we do not build its earnings into the level. Instead we value the venture separately. From the second anniversary, Baker Hughes has the right to require, and Cactus the right to make, a purchase of the remaining stake at six times trailing adjusted EBITDA, with a maximum enterprise value of $660 million and, if Cactus initiates the purchase, a minimum of $530 million. The purchase price of $344.5 million for 65% equals about 65% of $530 million. Bear case, about $22 per share. Drilling falls as in 2020, when owner earnings dropped 54% (from $2.04 to $0.95). We apply the same proportional drop to our level, roughly $1.10 per share, for three years. The business then settles at $1.40 per share, the average of 2019-2021 before the FlexSteel deal, because the acquisitions are assumed to add nothing lasting. The venture is worth $0 and the $24.5 million of payments to Baker Hughes still come due, about $0.31 per share. Base case, about $43.50 per share. Owner earnings stay at about $2.37 per share indefinitely, worth about $39.50. The venture is valued at what was paid, $344.5 million less the $24.5 million of deferred payments, about $4.01 per share on 79.9 million Class A and Class B shares. We add nothing for growth, for a recovery in drilling, or for the tax receivable agreement payments ending. Bull case, about $57.40 per share. The business keeps earning what it did across 2023-2025, an average of about $3.14 per share, worth about $52.35. The venture is valued at 65% of the $660 million maximum enterprise value, about $429 million less the $24.5 million of payments, about $5.07 per share. What could make this wrong. A prolonged drilling downturn, tariff costs (Pressure Control operating income fell 9.9% in 2025, which the company attributed mainly to tariff costs on product margins and higher legal expenses and reserves), the customer that is 17% of revenue reducing orders, or a venture that earns less than its cost would each hurt. If the venture proves very profitable, or drilling activity holds above our full-cycle level, the value would be higher. The 2026 venture results could not be fully reconciled from the interim filing data available to us.