Archrock Inc
AROC
$33.35
-1.71%
Archrock Inc is an energy infrastructure company that provides natural gas compression services and aftermarket support to customers across the United States, operating in the midstream oil and gas equipment and services industry. As a leading provider based on total compression fleet horsepower, the company distinguishes itself through its large-scale owned fleet and integrated service offerings spanning contract operations and aftermarket parts and maintenance. The current investor narrative centers on the company's robust revenue growth driven by rising natural gas demand and its ability to expand margins through operational efficiency, while also navigating the cyclical nature of energy markets and potential regulatory shifts.…
AROC
Archrock Inc
$33.35
AROC 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Archrock Inc's 12-month outlook, with a consensus price target around $42.88 and implied upside of +28.6% versus the current price.
Average Target
$42.88
0 analysts
Implied Upside
+28.6%
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 recommendation 1.43 on a 1-5 scale). The average target price is $42.88, implying approximately 18.6% upside from the current price of $36.14. The distribution leans heavily bullish, with no hold or sell ratings, indicating strong analyst confidence. The target range spans from $40.00 (low) to $46.00 (high). The high target of $46.00 assumes continued growth in natural gas compression demand and potential multiple expansion, while the low target of $40.00 still reflects a 10.7% upside, suggesting limited downside risk. Recent ratings from firms like Mizuho, Citigroup, and Wells Fargo have maintained positive stances (Outperform, Buy, Overweight), with no downgrades, reinforcing the bullish sentiment. The relatively tight spread between low and high targets ($6.00) indicates high conviction among analysts.
Bulls vs Bears: AROC Investment Factors
Archrock presents a compelling bull case with strong revenue growth (7.66% YoY), attractive valuation (PEG 0.18x), and robust analyst support (strong buy consensus, 18.6% upside). The company's solid profitability (net margin 19.7%) and free cash flow ($244.5M TTM) provide a foundation for continued dividends and growth. However, bears point to recent price weakness (-6.83% 1-month), moderate debt (D/E 1.62), and cyclical energy exposure. The single most important tension is whether the recent gross margin compression (from 52.9% to 47.5%) is temporary or signals structural cost pressures. If margins stabilize, the bull case dominates; if they continue to erode, the stock could face multiple compression. Currently, the bull case has stronger evidence given the low PEG and strong analyst conviction.
Bullish
- Strong Revenue Growth Trajectory: Revenue grew 7.66% YoY to $373.8M in Q1 2026, with consistent sequential growth from $347.2M in Q1 2025. This demonstrates sustained demand for natural gas compression services amid rising natural gas production.
- Attractive Valuation with Low PEG: Trailing P/E of 14.06x and PEG ratio of 0.18x indicate the stock is undervalued relative to its earnings growth rate. A PEG below 1.0 typically signals undervaluation, suggesting significant upside potential.
- Strong Analyst Consensus and Upside: 8 analysts rate it a 'strong buy' with an average target of $42.88, implying 18.6% upside from $36.14. No hold or sell ratings exist, reflecting high conviction in the company's prospects.
- Solid Profitability and Cash Flow: Net margin of 19.7% and ROE of 21.6% demonstrate efficient capital use. Free cash flow TTM of $244.5M provides ample liquidity for operations and dividends, with a dividend yield of 3.12%.
Bearish
- Recent Price Pullback and Short-Term Weakness: The stock declined 6.83% in the past month and 3.19% in the past three months, underperforming the S&P 500 by 7.61% and 6.69% respectively. This short-term weakness could signal profit-taking or fading momentum.
- Moderate Debt Levels: Debt-to-equity ratio of 1.62 indicates moderate leverage, which could strain finances if natural gas prices decline or interest rates remain high. Interest expense of $39.5M in Q1 2026 consumes a significant portion of operating income.
- Cyclical Exposure to Energy Markets: As an energy infrastructure company, AROC is sensitive to natural gas prices and production levels. A downturn in energy markets could reduce demand for compression services, impacting revenue and margins.
- Gross Margin Compression: Gross margin declined to 47.5% in Q1 2026 from 52.9% in Q4 2025, a drop of 540 basis points. This could indicate rising costs or pricing pressure, potentially squeezing profitability if the trend continues.
AROC Technical Analysis
Archrock is in a sustained uptrend over the past year, with a 1-year price change of +54.64%. The current price of $36.14 sits at 63.5% of its 52-week range ($21.17 low to $42.23 high), indicating the stock is closer to the high end but not overextended, suggesting continued momentum with room for further upside. The stock's beta of 0.836 implies it is less volatile than the market, which may appeal to risk-averse investors seeking energy exposure. Short-term momentum shows a divergence: the 1-month price change is -6.83%, while the 3-month change is -3.19%, both contrasting with the strong 1-year uptrend. This recent pullback could signal a temporary correction or profit-taking after the stock rallied 29.77% over the past 6 months. The relative strength versus the S&P 500 is negative over 1-month (-7.61%) and 3-month (-6.69%), but strongly positive over 1-year (+38.17%), suggesting the long-term trend remains intact despite short-term weakness. The 52-week low of $21.17 provides strong support, while the 52-week high of $42.23 acts as key resistance. A breakout above $42.23 would signal a continuation of the uptrend, potentially targeting new highs, while a breakdown below $21.17 would be a bearish reversal. With a beta of 0.836, the stock is 16.4% less volatile than the S&P 500, which may limit downside risk but also upside participation in strong market rallies.
Beta
0.88
0.88x market volatility
Max Drawdown
-20.5%
Largest decline past year
52-Week Range
$23-$42
Price range past year
Annual Return
+46.2%
Cumulative gain past year
| Period | AROC Return | S&P 500 |
|---|---|---|
| 1m | -12.1% | +2.8% |
| 3m | -9.8% | +4.2% |
| 6m | +4.1% | +11.3% |
| 1y | +46.2% | +21.5% |
| ytd | +25.2% | +12.7% |
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AROC Fundamental Analysis
Archrock's revenue trajectory is growing, with Q1 2026 revenue of $373.8 million, up 7.66% year-over-year from $347.2 million in Q1 2025. The multi-quarter trend shows consistent growth: Q2 2025 revenue was $383.2 million, Q3 2025 was $382.4 million, and Q4 2025 was $377.1 million, indicating stable demand. The contract operations segment generated $330.9 million in revenue, while aftermarket services contributed $42.9 million, highlighting the dominance of the core compression business. This growth is driven by increased natural gas production and infrastructure investment, supporting the investment case for continued expansion. Profitability is solid, with net income of $73.8 million in Q1 2026 and a net margin of 19.7%. Gross margin was 47.5%, slightly below the 52.9% in Q4 2025 but still healthy. Operating margin improved to 35.4% from 43.2% in Q4 2025, reflecting some cost pressure. The company is profitable and generating positive net income, with margins typical for the energy services industry. The balance sheet shows moderate leverage with a debt-to-equity ratio of 1.62 and a current ratio of 1.54, indicating adequate liquidity. Free cash flow (TTM) is $244.5 million, providing ample cash for operations and dividends. ROE is strong at 21.6%, reflecting efficient use of equity. The company generates sufficient cash flow to fund growth internally, reducing reliance on external financing, and the FCF yield of approximately 5.4% (based on market cap) suggests reasonable valuation.
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
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Valuation Analysis: Is AROC Overvalued?
Since net income is positive ($73.8 million in Q1 2026), the primary valuation metric is the P/E ratio. The trailing P/E is 14.06x, while the forward P/E is 15.06x, indicating the market expects modest earnings growth. The gap between trailing and forward P/E is small, suggesting stable earnings expectations. Compared to the industry average (not provided), the stock's P/E of 14.06x appears reasonable for the energy services sector, which often trades at 10-20x. The PEG ratio of 0.18x implies the stock is undervalued relative to its growth rate, as a PEG below 1.0 typically signals undervaluation. Historically, the stock's trailing P/E has ranged from 9.7x (Q4 2025) to 46.8x (Q4 2021). The current P/E of 14.06x is near the lower end of its historical range, suggesting the stock is not overvalued and may offer value. The P/B ratio of 3.04x is above the historical low of 1.13x (Q3 2022) but below the high of 3.99x (Q1 2026), indicating moderate valuation relative to book value.
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
Financial & Operational Risks: Archrock's debt-to-equity ratio of 1.62 indicates moderate leverage, with interest expense of $39.5M in Q1 2026 representing about 30% of operating income. While free cash flow of $244.5M TTM covers debt service, a sustained downturn in natural gas demand could pressure cash flows. The recent gross margin decline from 52.9% in Q4 2025 to 47.5% in Q1 2026 raises concerns about cost inflation or pricing pressure. Revenue concentration in contract operations (88.5% of total revenue) exposes the company to any disruption in that segment. Additionally, the net margin of 19.7% is healthy but could compress if operating expenses rise faster than revenue.
Market & Competitive Risks: The stock's beta of 0.836 suggests lower market correlation, but it remains sensitive to energy sector dynamics. A decline in natural gas prices could reduce drilling activity and demand for compression services. The current P/E of 14.06x is near the lower end of its historical range (9.7x-46.8x), limiting downside from multiple compression but also implying limited upside if growth decelerates. The energy services industry is competitive, with players like USA Compression Partners and Exterran, which could pressure pricing. Regulatory risks include potential methane emission rules that could increase compliance costs. No recent news highlights immediate threats, but the sector is subject to policy shifts.
Worst-Case Scenario: In a severe downturn, natural gas production could decline sharply, reducing demand for compression services. Combined with margin compression and rising interest rates, the stock could fall to its 52-week low of $21.17, representing a 41.4% decline from the current price of $36.14. This scenario would require a sustained drop in natural gas prices and a recession in energy activity. The historical max drawdown of -17.35% provides a less severe reference, but the 52-week low represents a realistic worst-case loss of approximately -41%.