RPC's Flat GAAP Earnings Are an Accounting Illusion — the Cash and Valuation Tell a Different Story

The market reads RPC's flat GAAP earnings as stagnation. The stock is down roughly 28% from its 52-week high of $8.16, currently trading at $5.87. The headline number — diluted EPS of $0.05 in both Q2 2026 and Q2 2025 — feeds a narrative that the business isn't improving.

The cash flows, margins, and balance sheet tell a different story. Revenue is accelerating. Adjusted EBITDA margins are expanding. The company sits on more cash than debt, trades at roughly half the enterprise-value multiple of its largest peer, and management has raised its capital spending outlook. That is a signal companies only send when they expect to earn their way through it.

The market is fixated on GAAP noise. The numbers underneath suggest RPC remains deeply undervalued.

Let me start with what actually happened in the second quarter.

RPC reported $460.9 million in revenue for Q2 2026, up 9.6% year-over-year and 1% sequentially. Adjusted EBITDA — earnings before interest, taxes, depreciation, and amortization, a rough proxy for cash earnings before investing decisions — came in at $66.0 million, up 23.3% from Q1's $53.5 million. The adjusted EBITDA margin expanded to 14.3%, up 250 basis points sequentially from 11.8%.

Adjusted diluted EPS was $0.08, doubling the $0.04 consensus estimate. The GAAP EPS number of $0.05 matched the prior year quarter, which is the figure driving much of the market's skepticism. But that GAAP figure is distorted by two structural headwinds that are already working through the business.

First, the Pintail Completions acquisition — closed in April 2025 for $245 million — generated $20.3 million in acquisition-related employment costs throughout 2025. These are non-cash accounting adjustments tied to contingent employment compensation, not operating deterioration. As those charges normalize, GAAP earnings catch up.

Second, RPC changed how it accounts for wireline cables beginning in Q4 2025. Cables previously capitalized and depreciated over 18 months are now expensed as the useful-life estimate was shortened. That created an additional $8.3 million in operating expense across 2025, flowing through the GAAP income statement but added back in adjusted measures. The adjusted EBITDA figure strips out both items to show the underlying cash-earnings trajectory.

That underlying trajectory is improving.

The Technical Services segment, which accounts for roughly 95% of revenue, saw operating income jump $11.6 million, or 73%, sequentially to $27.6 million. Cudd Pressure Controls' snubbing division, Spinnaker's cementing, and Thru-Tubing Solutions' downhole tools all posted double-digit revenue increases. Support Services revenue rose 11% sequentially as Patterson Rental Tools emerged from its typically weak first quarter.

Revenue grew 15% in full-year 2025 to $1.63 billion, driven by the Pintail acquisition adding a major wireline revenue base. Adjusted EBITDA for the full year was $232.7 million, essentially flat versus the prior year's $232.9 million. Flat EBITDA on a 15% revenue increase is not the headline you want, but it reflects integration drag and the accounting shift from Pintail. As those normalize, margin expansion should be more visible on a like-for-like basis.

Now let's talk about the balance sheet.

Cash and equivalents stood at $179.5 million at June 30, 2026. Total notes payable were $30 million ($10 million current, $20 million long-term). That works out to net cash of $149.5 million and a debt-to-equity ratio of 2.7%. There are no borrowings outstanding on the $100 million revolving credit facility, which was amended to extend its maturity to June 30, 2031.

For a company that sits on more cash than debt, the balance sheet is not a risk. It is optionality. When oilfield services companies face downcycles, the leveraged ones get crushed. The ones with cash can wait out the cycle and buy at the trough. RPC is in the second group.

The free cash flow picture is weaker than the balance sheet strength would suggest. Full-year 2025 free cash flow was $52.9 million. The trailing twelve-month figure stands at $39.1 million, down 56.8% year-over-year. That reflects $143.9 million in capex against $183 million in operating cash flow. Management has now raised the 2026 capex outlook to $170–$190 million, focused on coiled tubing, downhole tools, and lower-emission equipment.

This is the one place where the data warrants caution. The dividend is paid out of free cash flow, not accounting income, and with $39 million in TTM free cash flow against a dividend program that consumed $35.1 million in 2025, there isn't a large buffer if spending stays elevated and operating cash flow doesn't keep pace. The payout ratio looks like roughly 170% of GAAP earnings, but GAAP earnings are the wrong denominator given the one-time charges discussed above. Against adjusted net income, the coverage is more comfortable. Still, the dividend is not sitting on a wide moat of excess cash.

From a valuation perspective, the picture shifts.

RPC trades at 5.7 times EV/EBITDA. Compare that to SLB, the largest oilfield services company, at 11.8 times. Noble at 8.7 times. Helmerich & Payne at 6.5 times. Even Valaris, which carries higher leverage and a more volatile drilling model, trades at 15.8 times EV/EBITDA.

RPC is the cheapest major oilfield services name by this multiple. At 5.7 times EV/EBITDA on $233 million in adjusted EBITDA, the market is pricing the business at an enterprise value of roughly $1.15 billion against a $1.3 billion market cap — in other words, the market is giving away the net cash balance almost for free.

The forward P/E of 29.3 times looks rich in isolation. But forward P/E is misleading when the denominator is depressed by one-time charges that are already running through the business. Analyst projections point to earnings approaching $116 million by 2029, implying roughly $0.53 per share at current share counts. At that point, the stock would trade closer to 11 times forward earnings — not expensive for a diversified oilfield services company with a net cash balance.

There are real risks to acknowledge.

The industry backdrop remains constrained. The U.S. rig count averaged 554 in Q2 2026, only 1% above Q1, and down 6% from a year earlier. Management has stated clearly that it will not reactivate pressure pumping fleets at current activity levels. That discipline preserves margins but caps the upside if demand unexpectedly accelerates.

CEO Ben Palmer is retiring by the end of 2026 after 30 years, with a board-led succession search underway. Leadership transitions introduce execution risk, though Palmer will remain in an advisory capacity. The board has not named a successor yet, which leaves the market without clarity on whether the current strategy — modest capex, targeted technology investment, no fleet reactivation — will continue.

The geographic concentration is also real. RPC is heavily weighted to the Permian Basin and North American shale more broadly. If operator spending there deteriorates, the revenue growth narrative loses its engine.

All things considered, here is the judgment.

The market is reading RPC's flat GAAP EPS as a signal that the business isn't improving. The data says otherwise. Revenue is growing 9.6% year-over-year. Adjusted EBITDA margins expanded 250 basis points sequentially. The balance sheet is net cash. The company trades at roughly half the EV/EBITDA multiple of its largest peer.

The risks are real — thin free cash flow, elevated capex, CEO uncertainty, Permian concentration. But the margin of safety is built into the valuation, not the headline earnings. A company with $149 million in net cash, no revolver debt, and $183 million in operating cash flow isn'tgoing to go away. And if the Pintail integration normalizes and the raised capex begins generating returns, the earnings trajectory has room to surprise to the upside.

While it's true that free cash flow has been declining and the dividend coverage is tighter than I'd prefer, the peer valuation discount still creates meaningful re-rating potential if the business executes as management projects. Even if the industry doesn't improve materially in 2027, RPC's net cash position and expanding adjusted margins provide a floor that the current price doesn't reflect.

I reaffirm my Buy rating on RPC.