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August 29, 2006 Stock Pick: Natural Gas Services Group, Inc. (NGS)

Stock Price: $14.60

Natural Gas Services Group, Inc. is a provider of small to medium horsepower, wellhead compression equipment to the natural gas industry with a primary focus on the non-conventional gas industry including coalbed methane, gas shales and tight gas. The company manufactures, fabricates, rents and maintains natural gas compressors that enhance the production of natural gas wells.

NGS reminds us of our SWSI discovery. SWSI is a larger company than NGS, but they both operate in the gas well space focused on improving production. SWSI is more on the service end and NGS is more on the manufacturing end of improving production. We first released SWSI as a stock pick at $22.33 on November 11th of last year, by June of this year SWSI reached a 52-week high of $40.13.

For the most recent quarter (Q2), NGS reported revenue of $15.5 million, up from $12.0 million for the same period a year ago. Net income increased 13% for the second quarter year over year.

NGS has a 52-week high of $39.99. NGS trended up convincingly this time last year. We believe NGS will exhibit a mini-uptrend this time around.

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