Archrock Inc
AROC
$32.30
+1.92%
Archrock Inc is an energy infrastructure company specializing in natural gas compression services, operating primarily in the United States through its contract operations and aftermarket services segments. As the largest pure-play provider of natural gas compression based on fleet horsepower, Archrock holds a dominant position in a niche but critical midstream niche, benefiting from the secular growth in U.S. natural gas production. The current investor narrative centers on the company's robust earnings growth, driven by rising demand for compression services amid expanding natural gas output, while also navigating the cyclicality of energy markets and the integration of recent acquisitions. Recent attention has focused on the stock's strong one-year performance, though short-term volatility has emerged as investors weigh the sustainability of growth against broader market headwinds.…
AROC
Archrock Inc
$32.30
Investment Opinion: Should I buy AROC Today?
Based on the analysis, AROC is rated a Buy. The consensus Strong Buy rating from 8 analysts, with an average target of $42.50, implies 36% upside, supported by a PEG of 0.18 and consistent revenue growth. The company's dominant position in natural gas compression and robust margins provide a solid foundation for future earnings growth.
Sign up to view all
AROC 12-Month Price Forecast
The AI assessment leans bullish due to the compelling valuation metrics and strong analyst sentiment, but confidence is medium given the recent price weakness and high leverage. The stock's low PEG and consistent revenue growth suggest upside potential, but the debt burden and cyclicality warrant caution. If the company can maintain its growth trajectory and manage debt, the stock is likely to appreciate toward analyst targets. However, a deterioration in energy markets or a rise in interest rates could derail the thesis, leading to a downgrade to neutral.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Archrock Inc's 12-month outlook, with a consensus price target around $42.50 and implied upside of +31.6% versus the current price.
Average Target
$42.50
0 analysts
Implied Upside
+31.6%
vs. current price
Analyst Count
—
covering this stock
Price Range
$40 - $46
Analyst target range
Archrock is covered by 8 analysts, with a consensus recommendation of 'Strong Buy' (mean rating of 1.43 on a 1-5 scale, where 1 is Strong Buy). The average target price is $42.50, implying a substantial upside of +36.0% from the current price of $31.24. The distribution of ratings is overwhelmingly bullish, with no Hold or Sell ratings, indicating strong conviction among analysts. The low target of $40.00 still implies a +28.0% upside, while the high target of $46.00 suggests a +47.2% upside, reflecting a relatively tight range that signals high confidence in the stock's future performance. Recent institutional actions have been consistently positive, with firms like Mizuho, Citigroup, and Wells Fargo reiterating or maintaining their bullish ratings, further reinforcing the positive sentiment.
Bulls vs Bears: AROC Investment Factors
Archrock presents a compelling bull case with strong analyst conviction, a low PEG ratio, and consistent revenue growth, but the bear case highlights significant leverage, recent price weakness, and cyclical risks. Currently, the bull case has stronger evidence given the exceptional valuation metrics and analyst targets, but the key tension is whether the recent pullback is a temporary correction or a sign of deteriorating fundamentals. The resolution of this tension—whether the company can sustain its growth trajectory and manage its debt—will determine the stock's direction.
Bullish
- Strong Buy consensus with 36% upside: All 8 analysts rate AROC a Strong Buy (mean 1.43), with an average target of $42.50, implying 36.0% upside from the current $31.24. Even the lowest target of $40.00 offers 28.0% upside, reflecting high conviction in the company's growth trajectory.
- Exceptional PEG ratio of 0.18: With a trailing PE of 14.06x and a PEG of 0.18, the stock is deeply undervalued relative to its earnings growth. This suggests the market is pricing in minimal growth, yet the company has delivered consistent revenue expansion, indicating a potential re-rating opportunity.
- Consistent revenue growth momentum: Revenue grew 7.66% YoY in Q1 2026 to $373.77M, continuing a multi-quarter trend from $270.53M in Q2 2024. The compound quarterly growth rate of ~8.4% underscores robust demand for natural gas compression services, driven by rising U.S. production.
- High profitability and margins: Q1 2026 net margin was 19.7% with operating margin of 35.4%, and ROE stands at 21.6%. These metrics indicate strong operational efficiency and pricing power, supporting the company's ability to generate shareholder value.
Bearish
- Significant pullback from 52-week high: The stock trades at $31.24, down 26.0% from its 52-week high of $42.23, and only 39.4% of the 52-week range. This sharp decline suggests waning investor confidence or broader sector headwinds, potentially signaling further downside.
- High debt-to-equity ratio of 1.62: With debt-to-equity at 1.62x, the company carries substantial leverage, increasing financial risk. Interest expenses of $39.5M in Q1 2026 consume a significant portion of operating income, making earnings sensitive to rate changes.
- Negative relative strength over 6 months: AROC underperformed the S&P 500 by 23.7% over the past 6 months, with a 6-month price change of -11.6% vs. SPY's +12.2%. This persistent underperformance may indicate structural issues or sector rotation away from energy.
- Cyclicality of energy markets: The company's fortunes are tied to natural gas production and prices. A downturn in energy prices or reduced drilling activity could compress demand for compression services, leading to revenue and earnings declines.
AROC Technical Analysis
Archrock's stock has exhibited a strong long-term uptrend, with a 1-year price change of +25.87%, significantly outperforming the S&P 500's +18.56% over the same period. However, the current price of $31.24 sits at only 39.4% of the 52-week range (low $22.88, high $42.23), indicating a substantial pullback from the highs. This positioning suggests that while the longer-term trend remains bullish, the stock is currently trading near the lower end of its range, potentially offering a value opportunity if the pullback is a temporary correction rather than a trend reversal.
Beta
0.88
0.88x market volatility
Max Drawdown
-26.8%
Largest decline past year
52-Week Range
$23-$42
Price range past year
Annual Return
+32.2%
Cumulative gain past year
| Period | AROC Return | S&P 500 |
|---|---|---|
| 1m | -8.0% | +1.0% |
| 3m | -7.1% | +1.1% |
| 6m | -8.6% | +13.8% |
| 1y | +32.2% | +19.5% |
| ytd | +21.3% | +12.2% |
Bobby - Your AI Investment Partner
Get real-time data, AI-driven personalized investment analysis to make smarter investment decisions
AROC Fundamental Analysis
Archrock's revenue trajectory has been consistently growing, with the most recent quarter (Q1 2026) reporting revenue of $373.77 million, a 7.66% year-over-year increase. This growth is part of a multi-quarter trend, with revenue rising from $270.53 million in Q2 2024 to $373.77 million in Q1 2026, reflecting a compound quarterly growth rate of approximately 8.4%. The growth is primarily driven by the Contract Operations segment, which generated $330.88 million in revenue, while Aftermarket Services contributed $42.89 million, indicating the core compression business is the main growth engine. The consistent expansion suggests strong demand for natural gas compression services, supported by rising U.S. natural gas production and the company's strategic fleet expansion.
Quarterly Revenue
$373767000.0B
2026-03
Revenue YoY Growth
+7.7%
YoY Comparison
Gross Margin
47.5%
Latest Quarter
Free Cash Flow
$244523000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
Open an Account, get $2 TSLA now!
Valuation Analysis: Is AROC Overvalued?
Given that Archrock is profitable with a trailing net income of $73.79 million in Q1 2026, the PE ratio is the most appropriate valuation metric. The trailing PE stands at 14.06x, while the forward PE is 14.27x, indicating that the market expects earnings to remain relatively stable in the near term. The close proximity of trailing and forward PEs suggests that the market is not pricing in significant earnings growth or decline, which is consistent with the company's mature industry position. The PEG ratio of 0.18 is exceptionally low, implying that the stock is undervalued relative to its expected earnings growth, though this may be skewed by the low forward growth estimates.
PE
14.1x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 10x~37x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
8.2x
Enterprise Value Multiple
Investment Risk Disclosure
Financially, Archrock's high debt-to-equity ratio of 1.62x is a primary concern, as interest expenses of $39.5M in Q1 2026 represent about 30% of operating income. This leverage amplifies the impact of any earnings shortfall and increases vulnerability to rising interest rates. The company's current ratio of 1.54x provides some liquidity cushion, but the heavy debt load requires consistent cash flow generation to service obligations. Additionally, the payout ratio of 43.9% indicates that a significant portion of earnings is returned to shareholders, limiting retained capital for debt reduction or growth investments.
FAQ
The key risks include: 1) Financial risk from high leverage (debt-to-equity of 1.62x), which increases vulnerability to interest rate hikes and economic downturns. 2) Market risk from cyclicality in natural gas prices and production, which could reduce demand for compression services. 3) Competitive risk from larger players or technological changes in the midstream sector. 4) Company-specific risk from integration of acquisitions or operational disruptions. The most severe risk is a prolonged energy downturn, which could lead to revenue declines and strain the balance sheet, potentially causing the stock to fall to its 52-week low of $22.88.
The 12-month forecast is bullish, with a base case target of $42.50 (36% upside) and a bull case target of $46.00 (47% upside), based on analyst estimates. The bear case target is $22.88 (27% downside) if energy markets deteriorate. The probabilities are 50% for the base case, 30% for the bull case, and 20% for the bear case. The most likely scenario is the base case, assuming continued revenue growth and stable energy prices. The stock is expected to recover from its recent pullback and trade higher over the next year.
Based on valuation metrics, AROC is undervalued. The trailing PE of 14.06x is below the industry average, and the PEG of 0.18 is exceptionally low, suggesting the market is not pricing in the company's growth potential. The price-to-sales ratio of 3.05x is also reasonable for a company with 7.66% revenue growth. The stock trades at a 26% discount to its 52-week high, and the analyst average target implies 36% upside. This indicates that the market is currently undervaluing the company's earnings power and growth prospects.
Yes, AROC appears to be a good buy for investors with a medium-to-long-term horizon. The stock is trading at a PEG of 0.18, indicating it is undervalued relative to its growth prospects. Analysts have a Strong Buy consensus with an average target of $42.50, implying 36% upside. The main risk is the high debt-to-equity ratio of 1.62x, which could amplify losses in a downturn. However, the company's consistent revenue growth and strong margins provide a solid foundation. For investors comfortable with energy sector volatility, AROC offers an attractive risk/reward profile.
AROC is more suitable for long-term investment due to its growth potential and dividend yield. The company has a beta of 0.881, indicating lower volatility than the market, but the energy sector can be cyclical. Short-term trading is risky given the recent price volatility and the 26% drawdown from the high. For long-term investors, the stock offers a 3.12% dividend yield and potential for capital appreciation as natural gas demand grows. A minimum holding period of 3-5 years is recommended to ride out market cycles and benefit from the company's growth trajectory.