Oil-field data specialist Core Labs (CLB) had a somewhat disappointing 2017. While its financial results rebounded, they didn't quite experience the "V-shaped" recovery the company envisioned. As a result, the stock ended the year down 8.7%, significantly unperforming both oil prices and the market.

However, the stock has been on fire this year, rebounding more than 7% in less than two weeks and continuing its torrid run since late October. With shares up nearly 35% over that time frame, the stock isn't quite the compelling bounce-back candidate it was a few months ago. While it might still have room to run, a lot would have to go right for it to be worth buying today.

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Profits could rapidly recover in 2018

While its financial results didn't bounce back as fast as Core Labs anticipated last year, it did post much higher results through the third quarter: Revenue was up 9.6% versus the same period of 2016, while earnings rebounded 25.2%. In addition, the company expects that sales in the fourth quarter would be 14.7% higher than in the year-ago quarter, while earnings would jump 41.5%.

The company also noted that earnings could improve significantly from that level in the coming years because it only expected an operating income margin of 19% during the fourth quarter. That's well short of the 35% to 45% margin it has enjoyed historically. 

Two factors give investors reason to believe that margins and earnings could improve dramatically in 2018. First, management noted that several oil companies sanctioned large offshore oil and gas projects at the end of last year, which would lead to an increased workload for the company in early 2018. Second, Core noted that oil companies in the U.S. had shifted their focus from drilling at all costs to drilling for returns. Core expects to "benefit from this shift" because oil companies would employ "higher technological solutions," which have higher margins.

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A free cash flow machine with one main objective

This potentially rapid improvement in earnings could enable Core to produce a gusher of free cash flow. (The company leads the oil-field service sector in converting revenue into free cash.) While the company could use that excess money for a variety of things, it typically returns the bulk of it to investors. In fact, through the third quarter of last year, it returned all its free cash to investors, including paying $72.9 million in dividends and repurchasing $8.2 million shares. 

As earnings and cash flow continue rebounding, Core will have even more money to return to shareholders, with buybacks the most likely use of that excess cash. In fact, before selling some stock in 2016 to reduce debt, the company had been chipping away at its share count over the previous 14 years, cutting it 50% by the end of 2015. Continued buybacks should accelerate earnings-per-share growth, which could help drive Core's stock higher.

It might be better to wait

In part because of this anticipated rapid earnings improvement, Core Labs' stock isn't as cheap as it was last fall, when shares were lower by a third. Nonetheless, the stock still appears to have room to run -- it's still down about 45% over the past few years. As long as oil prices hold up, earnings bounce back as expected, and the share count heads lower, this stock should have the fuel needed to keep rebounding.

Yet for shares to keep moving higher, investors must be willing to pay an even higher price for the stock. Shares currently trade at a valuation of about 43 times expected 2018 earnings -- significantly higher than the roughly 30 times earnings shares have fetched in the past. Many analysts expect oil to pull back a bit in the coming months, which could cause shares to follow it lower. That potential for a better buying opportunity on this pricey stock is why it doesn't seem like a great buy right now.