ENERFLEX LTD., $11.28 - Toronto symbol EFX

ENERFLEX LTD., $11.28 (Toronto symbol EFX; TSINetwork Rating: Extra Risk) (403-387-6377; www.enerflex.com; Shares outstanding: 77.4 million; Market cap: $873.1 million; Dividend yield: 2.1%) rents and sells equipment and services for natural gas production, including compression and processing plants, refrigeration equipment and power generators.

In the quarter ended December 31, 2011, Enerflex’s revenue rose 10.4%, to $383.8 million from $347.6 million a year ago. The company gets 28% of its revenue from stable, recurring sales of parts and services.

Without one-time items, earnings per share doubled, to $0.22 from $0.11, due to the higher revenue and improved profit margins. Enerflex’s long-term debt of $119.0 million is just 13.7% of its market cap.

Backlog booms with shale gas

Enerflex’s order backlog continues to grow. The company added $342.5 million of orders in the latest quarter, to bring its total backlog to $986.1 million on December 31, 2011. That’s up 53.2% from $643.6 million a year earlier. Enerflex benefited from rising shale gas production in the southern U.S., including the Eagle Ford and Marcellus areas.

The company has a strong position in three fast-growing markets: U.S. and Canadian shale gas production, Australian natural gas from coal beds, and conventional Middle Eastern natural gas, which is converted to liquefied natural gas (LNG) for shipping. Natural gas prices are at 10-year lows, but companies continue to increase their drilling and production.

Enerflex trades at 12.3 times its forecast 2012 earnings of $0.92 a share. The stock yields 2.1%.

Enerflex is a buy.

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