The energy sector is expanding as a result of population growth, industrialization, and economic development, with advances in renewable energy technologies and sustainability encouraging investment and innovation. Given the industry’s growth prospects, fundamentally strong energy stocks TotalEnergies SE (TTE), ChampionX Corporation (CHX), and Profire Energy, Inc. (PFIE) could be ideal buys for solid returns.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the energy industry.
OPEC stuck to its forecast for solid growth in global oil demand this year and predicted a substantial spike in oil use in 2025, led by China and the Middle East.
In its monthly report, the producer group said world oil demand would rise by 2.25 million barrels per day (bpd) in 2024 and 1.85 million bpd in 2025. OPEC noted that global oil demand growth is forecast to outpace the anticipated increase in non-OPEC supply over the next two years.
According to McKinsey, energy investments are expected to climb between $2.0 and $3.2 trillion by 2040, representing a 35–120% increase. Global energy consumption is rising, boosting cleaner, more sustainable sources such as solar and wind power.
The oil and gas market is expected to be valued at $9.35 trillion by 2028 with a CAGR of 5.2%, driven by the identification of resources, government backing, digital technologies, reservoir modeling, oil drilling, and industrial alliances. In addition, the global energy as a service market is expected to reach $140.50 billion by 2030, increasing at a 9.6% CAGR.
Considering these conducive trends, let’s analyze the fundamentals of the featured energy stocks.
TotalEnergies SE (TTE)
Headquartered in Courbevoie, France, TTE is a multi-energy company that produces and markets fuels, natural gas, and electricity in France, the rest of Europe, North America, Africa, and internationally. It operates through Integrated Gas, Renewables & Power; Exploration & Production; Refining & Chemicals; and Marketing & Services segments.
TTE’s forward EV/Sales of 0.84x is 55.9% lower than the industry average of 1.90x. Its forward Price/Sales of 0.70x is 46.5% lower than the industry average of 1.31x.
TTE’s trailing-12-month levered FCF margin of 11.93% is 96.1% higher than the industry average of 6.08%. Its trailing-12-month ROTC of 14.22% is 57% higher than the industry average of 9.06%.
TTE’s revenue from sales for the fiscal third quarter ended September 30, 2023, came in at $54.41 billion. The company’s adjusted net income and net income per share came in at $6.5 billion and $2.63, respectively. Also, its adjusted EBITDA stood at $13.06 billion.
Analysts expect TTE’s revenue to come in at $220.52 billion for the year ending December 2024. Its EPS is expected to come in at $9.27 for the same period. The stock has gained 9.6% over the past six months to close the last trading session at $63.87.
TTE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TTE has a B grade for Stability, Momentum and Quality. Within the Energy - Oil & Gas industry, it is ranked #13 out of 82 stocks. To see additional POWR Ratings for Growth, Value and Sentiment for TTE, click here.
ChampionX Corporation (CHX)
CHX provides chemistry solutions, and engineered equipment and technologies to oil and gas companies worldwide. The company operates through four segments: Production Chemical Technologies; Production & Automation Technologies; Drilling Technologies; and Reservoir Chemical Technologies.
CHX’s trailing-12-month EV/Sales of 1.46x is 23.1% lower than the industry average of 1.90x.
CHX’s trailing-12-month asset turnover ratio of 1.13x is 105% higher than the industry average of 0.55x. Its 13.05% trailing-12-month levered FCF margin is 114.5% higher than the 6.08% industry average.
For the fiscal fourth quarter, which ended on December 31, 2023, CHX’s revenue amounted to $943.56 million, while its gross profit came in at $282.22 million.
Moreover, the company’s attributable net income and EPS came in at $77.20 million and $0.39, up 13.8% and 18.2% from the prior-year quarter, respectively. Also, its adjusted EBITDA grew 10.4% from the year-ago value to $198.15 million.
Street expects CHX’s revenue to increase 3.8% year-over-year to $3.91 billion for the year ending December 2024. Its EPS is expected to grow 15.7% year-over-year to $1.97 for the same period. It surpassed EPS estimates in three of four trailing quarters. CHX’s shares have gained 2.8% over past nine months to close the last trading session at $26.57.
It’s no surprise that CHX has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Momentum and Quality. It is ranked #8 out of 51 stocks in the Energy - Services industry.
Beyond what is stated above, we’ve also rated CHX for Growth, Value, Stability and Sentiment. Get all CHX ratings here.
Profire Energy, Inc. (PFIE)
PFIE provides burner and combustion management systems and solutions for natural and forced draft applications in the United States and Canada.
PFIE’s forward EV/Sales of 1.66x is 42.5% lower than the industry average of 2.88x. Its forward EV/EBITDA of 5.37x is 65.7% lower than the industry average of 15.66x.
PFIE’s trailing-12-month asset turnover ratio of 1.03x is 86.5% higher than the industry average of 0.55x. Its 15.17% trailing-12-month ROTA is 108.7% higher than the 7.27% industry average.
PFIE’s total revenues for the third quarter ended September 30, 2023, increased 15.6% year-over-year to $14.83 million. Its gross profit rose 22.2% over the prior-year quarter to $7.48 million. Its income from operations rose 20.1% year-over-year to $2.54 million.
For the same quarter, the company’s net income increased 68.4% year-over-year to $2.04 million. In addition, its EPS came in at $0.04, representing an increase of 100% year-over-year.
The consensus revenue estimate of $62.90 million for the year ending December 2024 reflects a 7.5% rise year-over-year. Its EPS is expected to come in at $0.17 for the same period. It surpassed EPS estimates in three of four trailing quarters. The stock has gained 35.5% over the past year to close the last trading session at $1.49.
PFIE has an overall B rating, equating to a Buy in our POWR Ratings system.
PFIE’s is ranked #9 in the same industry. It has a B grade for Value and Quality. To see additional PFIE’s ratings for Momentum, Growth, Sentiment and Stability, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
TTE shares were trading at $65.04 per share on Tuesday afternoon, up $1.17 (+1.83%). Year-to-date, TTE has declined -3.47%, versus a 3.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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