Everything You Need to Know About Aris

Overview of our Research on Aris

Today, just a quick one.

We’re both just back from Italy, where we each ran a marathon (yes, voluntarily), followed by a few extra days to “recover” and soak up the local culture—read: drink Aperol Spritz like it was our job. Let’s just say we weren’t exactly in the headspace to tackle a fresh research rabbit hole this week. For that, you’ll have to wait until Sunday. Hint: there's an orange man currently flipping the financial world upside down—and we are very intrigued.

So for today, we’re keeping it light.

We’re bringing you a quick recap of our deep dive into Aris Water Solutions. Over the past few weeks, we published six articles on this company, and in this post, we’re summarizing them all—giving you a clear overview of what we covered, what you might have missed (shame on you, btw), and how it all fits together.

Consider this your Aris cheat sheet.

Part I: Why Aris Might Be the Oil Industry’s Best-Kept Secret

We kicked off the series with a look at how Aris Water Solutions ended up on our radar. It all started with a top-down screening of macro themes—think sustainability, demographics, and digitalization—that led us to the Environmental & Waste Services sector. From there, Aris stood out as a niche player solving a huge problem in the oil-rich Permian Basin: water.

In a region where oil production creates more wastewater than actual oil, Aris built a system to collect, recycle, and resell that water—tackling an environmental nightmare while creating a profitable business model. We dove into their origins, strategy, and infrastructure, and broke down how they plan to scale in the years ahead.

If you want the broader perspective (and trust us, it’s a fascinating mix of geology, regulation, and clever execution), Part I is a must-read.

Part II: What Trump’s Next Move Could Mean for Aris Investors

This time we zoomed out. Way out. Part II dives deep into the big-picture forces shaping Aris’s future—macroeconomic variables like inflation, regulation, oil prices, and even the geology of the Permian Basin. Yes, rocks really do matter when you’re in the business of managing wastewater from oil production.

We unpacked how everything from rising seismic activity to local labor shortages can add friction to Aris’s operations. More interestingly, we saw how regulation—often seen as a business killer—might actually be a growth engine for Aris.

We also broke down the curious (and often contradictory) behavior of oil prices and how those swings ripple through Aris’s bottom line. Spoiler: oil production doesn’t always dip when prices fall, but rig activity often does—and that matters for Aris.

And lastly, we explained why we usually steer clear of macro in our investment thinking, but why, in this case, there was simply no way around it. The external world is Aris’s world.

In short: If you’ve ever wondered how shifting regulation, resource scarcity, and volatile oil markets collide to shape the future of a niche water company—this one’s for you.

Part III: Navigating the Waters: Analyzing Aris’s Strategic Landscape

In the third article, we stepped back from macro and zoomed in on Aris’s operations. Through a classic SWOT analysis—Strengths, Weaknesses, Opportunities, and Threats—we laid out the full strategic landscape. Think of it as a map of where Aris thrives, where it’s vulnerable, and where the real upside might come from.

We broke down their long-term contracts, deep-rooted partnerships (hi, Chevron), and unmatched infrastructure in the Permian Basin. But we didn’t shy away from the tough stuff either: overreliance on a single region, customer concentration, and capacity bottlenecks.

Then we looked forward: could Aris turn water into more than just a service? Could they unlock new revenue streams from analytics, agriculture, or even minerals? The potential is there—if they play their cards right.

Bottom line? Part III gives you a grounded, no-BS take on how Aris operates—and where it could go next.

Part IV: Aris Financial Health Check

In this one, we finally rolled up our sleeves and started tackling the numbers—starting with the balance sheet. We zoomed in on assets, liabilities, and long-term debt to see whether Aris has the financial backbone to support its growth story. We looked beyond the pitch deck and asked: does Aris actually have the financial firepower to pull off its ambitious growth strategy?

The verdict? Promising. Aris is investing heavily in infrastructure, and its assets are stacked with long-lived essentials like pipelines and treatment facilities. We spotted strong signs of expansion—and long-term thinking.

But we also flagged some big questions. Their debt situation looks manageable now (thanks to bond refinancing), but it’s something investors will need to keep an eye on. Same goes for their reliance on just a few big customers—though one of them, ConocoPhillips, also happens to own a big stake in the company. Convenient.

If you’ve ever wanted to peek under the hood and see if a company’s growth story holds up financially, Part IV’s your guide.

Part V: How Aris is Quietly Turning Water Into Cash

This time, we focused on performance. Revenue, profits, margins—Part V dives into the income and cash flow statements to see if Aris is turning its infrastructure into actual returns.

Spoiler: they’re doing better than you might think. Revenues are up, margins are improving, and cash flows are healthy—Aris converted 41% of 2024 revenue into operating cash flow. Not bad for a capital-intensive business.

But it’s not all smooth sailing. Stock-based compensation surged by 50% last year, and abandoned wells tied to seismic activity are eating into cash. Still, Aris seems to be investing smart—splitting its bets between scaling core infrastructure and building out innovative water tech.

If you’re wondering whether Aris is just big on vision or actually walking the talk—Part V has the receipts.

Part VI: Valuing Aris

In our final chapter, we put Aris through the ultimate test: valuation. We pulled everything together—the strategy, the numbers, the risks—and asked one simple question: is this stock worth buying?

Rather than rely on a fragile DCF model, we used a more flexible implied growth approach. Why? Because reinvestment assumptions were just too shaky to model precisely. With Aris reducing CapEx and shifting toward shareholder returns, a traditional valuation would’ve given a false sense of accuracy.

Instead, we explored a range of growth and IRR scenarios, using a valuation table to test what kind of FCFF growth you’d need to justify various return targets. The result? If you believe Aris can grow FCFF ~10% per year, you’re looking at an 11% IRR. Not bad—but only if you’re comfortable with the risks. On a short-term horizon, that kind of growth may seem plausible—especially given Aris’s infrastructure buildout and rising water volumes. But keep in mind: the implied growth rate assumes Aris sustains this momentum over multiple decades. And that’s where it starts to feel a lot less realistic.

And there are risks. From macro shocks to shaky visibility into management execution, Aris is not a “set it and forget it” investment. But it’s also not a story stock—it’s a real business with real potential. Whether it earns a spot in your portfolio and if it is reasonable valued? That’s for you to decide.

We just gave you the framework.

Closing Remarks

Thanks for following along this deep dive—hope you got as much out of it as we did. And just to be clear: despite the potential we uncovered, neither of us walked away fully convinced to buy Aris. Why? Mainly the valuation—and the massive influence of macroeconomic forces far beyond the company’s control. It’s a fascinating case, but not one we’re jumping into with both feet.

Next up? Something a little (okay, a lot) more political. This Sunday, we’re digging into Trump’s proposed tariffs and what they could mean for investors. Spoiler: it’s not just about China—it’s about inflation, supply chains, and a potential ripple effect across markets. Don’t miss it

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💬 But before we dive into that—what’s your take on Aris? Which part of this deep dive stood out most to you? Do you agree with our cautious optimism, or are we missing something? Drop a comment below—we’re always up for a good discussion.

🔔 Enjoyed the series? Make sure to subscribe so you don’t miss Sunday’s article on Trump’s tariffs—and everything else we’ve got lined up. Trust us, you’ll want to stay in the loop.

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Please note: This article includes a disclaimer regarding investment advice.

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