3 Under-the-Radar Energy Stocks Set to Surge
The energy sector has kicked off 2025 with a strong start, outperforming the broader market as oil and natural gas prices climb higher. The S&P 500 Energy Sector (XLE) has returned 7.1% year-to-date, extending its impressive 14.1% gains over the past year.
While market giants dominate the headlines, under-the-radar energy stocks like DNOW Inc. (DNOW), Enerflex Ltd. (EFXT), and MRC Global Inc. (MRC) are quietly positioning themselves for substantial growth. These often-overlooked companies could offer investors a unique opportunity to capitalize on the evolving dynamics of the energy market.
Natural gas, often touted as a transition fuel, has seen a renewed surge in demand due to geopolitical dynamics, colder-than-expected weather, and the growing push for cleaner energy alternatives. According to the International Energy Agency (IEA), global natural gas demand reached a record high in 2024 and is projected to grow further in 2025. This has created a ripe environment for companies providing essential equipment, services, and infrastructure to support natural gas exploration and distribution.
Moreover, as the energy sector embraces new technologies and digital transformation, the rise of Energy as a Service (EaaS) presents a significant growth avenue. Companies that integrate technology with energy solutions will likely gain a competitive edge in addressing the market’s evolving needs.
The global EaaS is projected to grow from $85.62 million in 2024 to $208.20 million by 2032, exhibiting a CAGR of 11.8%. These optimistic stances on the global energy market create a thriving ground for energy stocks to breathe, even in the face of oil price volatility.
So, let us dive deep into the fundamentals of three Energy – Services stock picks, beginning with the third choice:
Stock #3: MRC Global Inc. (MRC)
MRC distributes pipes, valves, fittings, and other infrastructure products and services to diversified energy, industrial, and gas utility end markets. It provides supply chain solutions, technical product services, and a digital platform to its customers in the United States, Canada, and internationally.
On January 3, 2025, MRC announced a $125 million share repurchase program that is set to expire on January 2, 2028. This share repurchase program will strengthen MRC Global’s balance sheet, enhance shareholder value, and support future growth by returning cash to shareholders and improving financial flexibility.
On December 16, 2024, the company announced the sale of its Canadian operations by its subsidiary, MRC Global (Canada) ULC, to Emco Corporation. This divestiture aligns with MRC’s strategy to focus on core geographies and products with higher growth and profit potential that will enhance the overall adjusted gross and EBITDA margins.
The stock’s trailing-12-month Levered FCF Margin of 7.47% is 8.1% higher than the industry average of 6.91%. Likewise, its trailing-12-month ROCE of 14.71% is 7.6% above its industry average of 13.67%.
During the fiscal third quarter that ended September 30, 2024, MRC’s sales came in at $797 million. Its adjusted gross profit was reported to be $166 million, while its adjusted EBITDA stood at $48 million. In addition, the company’s adjusted net income attributable to common stockholders came in at $19 million and $0.22 per share.
Analysts expect MRC’s EPS for the fiscal 2025 first quarter (ending January 2025) to increase by 10% year-over-year to $0.22, while its revenue is estimated to come in at $763.93 million. It surpassed the consensus EPS estimates in three of the trailing four quarters, which is promising.
Over the past year, the stock has gained 43.9% to close the last trading session at $15.07. It soared 17.9% year-to-date.
MRC’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
MRC has a B grade for Value and Sentiment. It is ranked #12 out of 53 stocks in the Energy – Services industry.
Beyond what we have stated above, we have also given MRC grades for Growth, Momentum, Stability, and Quality. Get all the MRC’s ratings here.
Stock #2: DNOW Inc. (DNOW)
DNOW is a distributor of downstream energy and industrial products for petroleum refining, chemical processing, LNG terminals, power generation utilities, and customer on-site locations. It offers consumable maintenance, repair, and operating supplies, pipes, manual and automated valves, fittings, and more.
On November 26, 2024, DNOW announced an all-cash acquisition of Trojan Rentals, LLC, a provider of pump rentals, automation technology, and more. The acquisition strengthens DNOW’s water management solution offerings through Trojan’s automation portfolio and helps equip the company with the required portfolio to meet the growing demand for complex water management.
The stock’s trailing 12-month net income margin of 8.70% is 35.1% higher than the industry average of 6.44%. Likewise, its 20.02% trailing-12-month ROCE is 46.5% above the industry average of 13.67%.
In the fiscal third quarter ended September 30, 2024, DNOW’s revenue increased 3.1% year-over-year to $606 million. Its EBITDA, excluding other costs, was reported to be $42 million, while its operating profit amounted to $23 million. Moreover, its non-GAAP net income and EPS attributable to DNOW Inc. came in at $22 million and $0.21, respectively.
Street expects DNOW’s revenue for the fiscal year (ended December 31, 2024) to increase 1.5% year-over-year to $2.36 billion. Meanwhile, its EPS for the same period is expected to come in at $0.79.
The stock has gained 40.1% over the past year and 14.2% over the past three months to close the last trading session at $13.80.
DNOW’s POWR Ratings reflect strong prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Value and Quality. Within the same industry, it is ranked #8. To access DNOW’s Growth, Momentum, Stability, and Sentiment ratings, click here.
Stock #1: Enerflex Ltd. (EFXT)
EFXT provides energy infrastructure and transition solutions for natural gas markets across North America, Latin America, and the Eastern Hemisphere. Its offerings include gas compression, processing, power generation rentals, modular equipment, and low-carbon solutions, along with aftermarket services, maintenance, and project management for oil and gas customers.
On January 16, 2025, the company paid its shareholders a quarterly dividend of C$0.0375 per share, up 50% from the previous quarter. It pays an annual dividend of $0.10, which translates to a dividend yield of 1% at the prevailing price levels. Its four-year average dividend yield is 1.26%. Moreover, its dividend payouts have increased at a CAGR of 6.5% over the past three years.
On November 27, 2024, EFXT announced the termination of its modular cryogenic natural gas processing project in Kurdistan. This will allow the company to mitigate risks related to the ongoing Force Majeure and security issues while reallocating resources to more stable and profitable projects.
The stock’s trailing 12-month Levered FCF margin of 10.81% is 52.1% higher than the industry average of 7.10%. Likewise, its trailing-12-month asset turnover ratio of 0.80x is 70.3% above the industry average of 0.47x.
EFXT’s revenue increased 3.6% year-over-year to $601 million in the fiscal third quarter that ended on September 30, 2024. Its adjusted EBITDA grew 33.3% from the year-ago value to $120 million, while its operating income came in at $57 million, up 137.5% year-over-year. In addition, the company reported net earnings of $30 million, more than seven times higher than the $4 million recorded in the prior-year quarter.
For the fourth quarter, which ended December 31, 2024, EFXT’s revenue is expected to increase by 3.7% year-over-year to $597.51 million, while its EPS is estimated to be $0.19 in the same period.
Shares of EFXT have surged 96.9% over the past year and 59% over the past three months to close the last trading session at $10.24.
It’s no surprise that EFXT has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. It also has an A grade for Sentiment and a B for Growth and Value. Out of 53 stocks in the same industry, it is ranked #2.
In addition to what is stated above, we’ve also given EFXT ratings for Momentum, Stability, and Quality. You can get all the EFXT ratings here.
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DNOW shares were unchanged in after-hours trading Thursday. Year-to-date, DNOW has gained 6.07%, versus a 4.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta’s profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More…