Archrock, Inc. (AROC): what the price assumes

In the published model solve dated 2026-Q2, anchored at $32.69, Archrock, Inc. (AROC) is priced for +19.9% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/AROC

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 10: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.9% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: n/a

Valuation X-Ray

The price is supported by earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.9%); the inversion above states its own rate.

Per-Model Detail (n=12)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Archrock rents natural-gas compression on fixed monthly fees rather than on volumes, and the equipment stays where it is put: the 10-K gives the average deployment as approximately six years at a single customer location.
• The fleet expansion is being paid for from both sides of the balance sheet at once, with net debt of $2.4 billion and a share count up about 3.4% a year over the last four years.
• Growth capital spending stepped up to $347.7 million in 2025 from $250.9 million in 2024, and whether that new horsepower stays contracted is what the next few quarterly prints will settle.

Bull Case

Follow the horsepower and the capital-allocation story tells itself. Archrock sold roughly 325,000 horsepower of units in 2025 and about 175,000 the year before, and the 10-K is unambiguous about why: the focus is on large horsepower equipment as we aim to continue to capitalize on the trends that have been driving, and that we believe will continue to drive the demand for these units. Capital is being recycled out of the small units that earn least and into the large units customers are queueing for. Growth capital spending of $347.7 million in 2025, against $250.9 million in 2024, is the other half of the same decision.

The revenue underneath that swap behaves unlike most oilfield exposure. Compression is billed as a fixed monthly fee rather than on throughput, and the filing states the consequence directly: the fee structure and the longevity of operations reduces volatility and enhances the stability and predictability of our cash flows. A package that sits on one site for years, billed whether or not gas is moving through it, is closer to an infrastructure lease than to a service call.

Volume has followed. Total revenue reached $1,489.8 million in 2025 from $1,157.6 million in 2024, and contract operations alone accounted for $1,272.1 million of the later figure. The recurring, contracted line grew faster than the parts-and-service line beside it, which is the mix shifting in the direction a lender and an owner both want.

Demand is not something management has to talk into existence. The 10-K names the physical drivers it expects to persist: high levels of associated gas production from shale wells, which are generally produced at a lower initial pressure than dry gas wells, together with pad drilling that concentrates several wells on a single site. Lower wellhead pressure means more compression per unit of gas produced. The gas does not move without it.

Against the listed peers, USA Compression Partners (USAC) turns about 30.3% of revenue into operating profit and Kodiak Gas Services (KGS) about 27.0%, on 2025 revenue of $1.08 billion and $1.32 billion respectively, both smaller top lines than Archrock's. KGS describes primary contract terms on large horsepower running three to five years, which is the same contractual spine Archrock leans on. This is a business where the competitive question is who has iron available, not who is cheapest.

What today's price asks for is persistence rather than acceleration: economics like the current ones holding for roughly 6.4 years before fading to an ordinary pace. For a fleet under multi-year contracts, sited for years at a stretch, with new equipment ordered far in advance of delivery, that is a less heroic ask than it would be for a company obliged to win its revenue again every quarter.

Bear Case

The advantage Archrock holds right now is less contractual than it looks. It is scarcity. New compression packages are quoted at lead times of roughly 160 weeks, and while that queue exists the fleet stays full and pricing holds. A supply bottleneck is a genuine advantage while it lasts and it is nobody's moat. It ends when manufacturing catches up, and it ends fastest exactly when the returns on new horsepower are most visible to everyone else. None of that makes the advantage fake. It makes it dated.

That matters because of what the price already assumes. At $36.14 the market is paying for company-wide profit to compound at the fastest rate this business can finance internally, and to hold there for roughly 6.4 years before settling down. The rate is not the reach; Archrock has recently delivered growth of that order. The persistence is. Of the companies that have run that fast, only about a third were still running that fast that far out, and a single percentage point off that growth rate moves the required horizon by years, not months.

The financing of the expansion is the second strain. Interest expense ran $165.3 million in 2025 against income before income taxes of $423.6 million, so for every dollar of pre-tax profit reported, roughly forty cents went to lenders first. Net debt stands at $2.4 billion. And the equity has been asked to contribute as well: the share count is up about 3.4% a year across the last four years, which means per-share progress has to outrun a denominator that keeps growing.

Where the methods land is the readable part. The price sits about 52% above what the asset-value methods reach, about 21% above the earnings-power methods and about 20% above the peer-multiple methods, and only about 9% above the forward-growth methods. Nothing in that ordering is a scandal. It is what a fully-priced infrastructure asset looks like, and it means the return has to come from the business growing into the price rather than from the price having been wrong.

Underneath all of it sits a customer base whose spending is not Archrock's to control. The risk section is plain about the chain: if customers' finances deteriorate, Any such action by our customers would reduce demand for our services. Competition is named in the same register, with the filing flagging the effect if our competitors substantially increase the resources they devote to the development and marketing of competitive products, equipment or services. And costs travel upward faster than rates do, a point the company concedes when it notes that there may be a time delay between the increased commodity prices and the ability to increase the price. Contracts roll off. Renewal happens at whatever rate the market offers that day, and the market's mood that day will be set by how long the equipment queue still is.

Valuation

Strip the story out and today's price is a wager about time, not about rate. The market is paying for Archrock's profit to grow at the fastest pace it can finance from its own operations, and to keep doing so for roughly 6.4 years before settling into something ordinary. What is unusual is not the pace, which the company has recently delivered. It is how long the pace has to last. Measured against the record of companies that got there, only about a third were still sustaining it that far out, and the multiple the market is applying sits at the top end of its peer group rather than in the middle of it.

The methods split in one direction rather than at random. The price sits about 52% above the asset-value methods, about 21% above the earnings-power methods and about 20% above the peer-multiple methods, and only about 9% above the forward-growth methods. Read as a group, that is not a stock priced for a miracle. It is a stock priced so that the growth case has to be the right one, because it is the only lens that comfortably reaches.

In operating terms the requirement is simple: the fleet has to keep filling. Revenue reached $1,489.8 million in 2025 from $1,157.6 million in 2024, with contract operations supplying $1,272.1 million of the later total and aftermarket services the remainder. The capital behind that expansion is disclosed plainly: Growth capital expenditures were $347.7 million and $250.9 million for the years ended December 31, 2025 and 2024, respectively. Revenue is arriving. What the price poses is whether it keeps arriving at this slope for most of a decade.

Among the listed comparables the right reference set is not the pipeline. DT Midstream (DTM) converts about 49.5% of revenue into operating profit, but it owns gathering and transport assets rather than a rental fleet, and its economics are not Archrock's to reach for. The relevant reads are USA Compression Partners (USAC) at about 30.3% and Kodiak Gas Services (KGS) at about 27.0%, on 2025 revenue of $1.08 billion and $1.32 billion. Archrock's top line is larger than either, and its contracts run on the same structure.

The balance sheet bounds this, and it is working hard in the meantime. Net debt of $2.4 billion sits against a fleet that is contracted rather than speculative, which is the reason lenders will carry it. The equity has taken part of the load too: the share count is up about 3.4% a year over the last four years, which is the other half of how the fleet got bigger. That arrangement is comfortable while the wait for new equipment is measured in years, and it is the first thing to become uncomfortable if the wait shortens.

Catalysts

The most recent print landed softly. First-quarter 2026 revenue was $373.8 million, with contract operations revenue up 10% to $330.9 million, and both lines came in below analyst expectations as higher administrative costs offset the volume gain. Management left the full-year 2026 outlook unchanged at the same time. A miss on the quarter alongside a reaffirmed year is the shape of a timing problem rather than a demand problem, but it is also the version of that shape a management team would choose to present, so the second-quarter print is the one that adjudicates it.

The spending plan for this year is smaller than last year's. Management guided total capital spending of roughly $400 million to $445 million, of which $250 million to $275 million is growth. Set against the $347.7 million of growth capital deployed in 2025, that is a step down, and it is the clearest available signal about how much new horsepower the company expects to place into contracts this year.

Two operating details are worth carrying forward. New compression equipment is quoted at lead times of roughly 160 weeks, which is the supply condition holding utilization and rates where they are. And only about 35% of the quarter's bookings came from the Permian, with the balance spread across the Northeast, the Mid-Continent, East Texas and the Haynesville, and the Rockies. A demand base that no longer leans on one basin changes the shape of the downside, and it is the detail most likely to be underweighted while attention stays on the quarterly miss.

Peer Cohorts (Per Segment, With Filing Citations)

Contract operations / Aftermarket services (reported)

• USAC (USA Compression Partners, LP)
• FY2025 10-K: …service or transfer of the parts, and payment generally is due 30 days after receipt of our invoice. The amount of consideration we receive and revenue we recognize is based on the invoice amount. There are typically no material obligations for returns, refunds, or warranties. Our standard contracts do not usually…
• FY2025 10-K: …or on a month-to-month or longer basis. We primarily enter into fixed-fee contracts whereby our customers are required to pay our monthly fee even during periods of limited or disrupted throughput, which enhances the stability and predictability of our cash flows. We bill most of our customers in advance of the…
• KGS (Kodiak Gas Services, Inc.)
• FY2025 10-K: …years, depending on the customer, application, location, and size of the compression unit, with large horsepower typically contracted for a primary term of three to five years. After the expiration of the primary term, our contracts continue on a month-to-month basis until renewed or until the contract is terminated…
• FY2025 10-K: …high fleet utilization for our company. We are focused on being a resilient and sustainable enterprise and we seek to be a responsible operator that provides safe, reliable and efficient energy solutions. We will continue to innovate processes and technologies to assist our customers in meeting their emission…
• DTM (DT Midstream, Inc.)
• FY2025 10-K: …flow. Interruptible service revenues are recognized over time based on the output measure of natural gas volumes gathered, transported, or stored. Certain of our contracts allow for the recovery of production-related operating expenses, which are offsetting in revenue and operating expense. Recovery of…
• FY2025 10-K: …to natural gas price fluctuations. Firm service revenue contracts are typically long-term and structured using fixed demand charges or MVCs with fixed deficiency fee rates. Contracts structured using fixed demand charges contain a performance obligation of a stand-ready series of distinct services that are…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.