Is National Energy Services Reunited (NASDAQ:NESR) A High-Potential Buy Despite Share Dilution Concerns?

Investors evaluating National Energy Services Reunited (NASDAQ:NESR) must weigh its recent financial performance, institutional confidence, and analyst optimism against persistent dilution risks. While the company's Q3 2025 earnings missed expectations, its long-term growth trajectory-anchored by a transformative $30 billion Saudi Aramco contract-suggests that earnings per share (EPS) expansion and strategic momentum could outweigh near-term dilution challenges.

EPS Growth and Operational Resilience

NESR's Q3 2025 results revealed a diluted EPS of $0.18, a 15.6% sequential increase but a 18.2% year-over-year decline. However, this performance masks a broader trend: over the past twelve months, EPS grew by 33%, driven by improved operational efficiency and cost discipline. The company's ability to maintain EBITDA margins of 21.7% in a challenging quarter-despite a 9.8% sequential revenue drop-demonstrates resilience. Analysts project a 2026 revenue run rate of $2 billion, largely attributable to the Saudi Jafurah frac contract, which could catalyze a meaningful EPS rebound.

Institutional Confidence and Analyst Optimism

Institutional ownership of NESR has surged, with shares held by institutions rising by 12.95% to 56.82 million in the last quarter. Major firms like Encompass Capital Advisors and Dodge & Cox have either maintained or increased their stakes, signaling confidence in the company's strategic direction. Analysts have raised their price targets, with the average one-year target now at $18.56 (a 35% upside from the November 2025 closing price of $13.75). The median target of $15.00 implies a 7.4% upside, while some analysts project as high as $25.00 according to forecasts. This optimism is rooted in NESR's expanding Middle Eastern footprint and its role as a "National Champion" in Saudi energy services according to market analysis.

Dilution Risks and Mitigation Strategies

NESR has faced dilution headwinds, with a 5.6% increase in shares outstanding over the past year. This has pressured EPS growth, as the company's 33% year-over-year net income improvement translated to only a 15.6% sequential EPS increase according to Q3 2025 results. However, management has prioritized cost discipline and operational efficiency to offset dilution. For example, Q3 2025 saw a 16.7% improvement in net income despite softer operating conditions. The Saudi Jafurah contract, expected to span five years, is a critical dilution mitigant. By securing long-term revenue streams, the deal reduces reliance on short-term share issuance and positions NESR for sustained earnings growth.

The Saudi Jafurah Contract: A Game Changer

The $30 billion contract with Saudi Aramco is arguably NESR's most significant catalyst. Described as "transformational," the agreement is projected to elevate the company's revenue to $2 billion in 2026, up from an estimated $1.3 billion in 2025. The contract's five-year duration ensures steady cash flow, while the focus on unconventional fracturing services aligns with global energy transition trends according to market analysts. Analysts note that the project's ramp-up will likely drive drilling and completion activity beyond current levels, further boosting profitability according to industry reports.

Balancing Risks and Rewards

While dilution remains a concern, the combination of institutional support, analyst optimism, and the Saudi contract's scale suggests that NESR's fundamentals are robust. The company's ability to maintain EBITDA margins above 21% in a volatile market according to Q3 2025 results and its strategic alignment with Saudi Arabia's energy ambitions according to market analysis position it to outperform peers. However, investors should monitor contract execution risks and macroeconomic headwinds, such as inflation and geopolitical tensions, which could impact 2026 forecasts.

Conclusion

National Energy Services Reunited presents a compelling case for investors willing to tolerate short-term dilution in exchange for long-term growth. With a 2026 revenue run rate of $2 billion, strong institutional backing, and a median price target of $15.00, the stock appears undervalued relative to its potential. While dilution risks persist, the Saudi Jafurah contract and operational discipline provide a clear path to sustained outperformance. For those with a medium-term horizon, NESR could offer a high-reward opportunity in the energy services sector.