Energy businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But their prominence also brings high exposure to the ups and downs of economic and energy cycles. Luckily, the tide is turning in their favor as the industry’s 29% return over the past six months has topped the S&P 500 by 18.1 percentage points.
Regardless of these results, investors should tread carefully. The diversity of companies in this space means that not all are created equal or well-positioned for the inescapable downturn. Taking that into account, here is one energy stock poised to generate sustainable market-beating returns and two that may face trouble.
Two Energy Stocks to Sell:
Expro (XPRO)
Market Cap: $1.67 billion
Operating in over 50 countries from deepwater offshore platforms to remote onshore fields, Expro (NYSE: XPRO) provides equipment and services that help oil and gas companies drill wells, measure production, and maintain well integrity.
Why Does XPRO Give Us Pause?
- Smaller revenue base of $1.58 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Costly operations and weak unit economics result in an inferior gross margin of 20% that must be offset through higher production volumes
- Low free cash flow margin of 1.3% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Expro is trading at $14.79 per share, or 15.5x forward P/E. Dive into our free research report to see why there are better opportunities than XPRO.
NESR (NESR)
Market Cap: $2.46 billion
Operating across 16 countries from Algeria to Indonesia, NESR (NASDAQ: NESR) provides oilfield services like hydraulic fracturing, cementing, and drilling to oil and gas companies.
Why Does NESR Worry Us?
- Revenue base of $1.43 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Costly operations and weak unit economics result in an inferior gross margin of 12.7% that must be offset through higher production volumes
- Expenses have increased as a percentage of revenue over the last five years as its EBITDA margin fell by 48.4 percentage points
At $23.94 per share, NESR trades at 13.3x forward P/E. To fully understand why you should be careful with NESR, check out our full research report (it’s free).
One Energy Stock to Buy:
Crescent Energy (CRGY)
Market Cap: $3.82 billion
Controlling over 1.4 million net acres across proven U.S. basins, Crescent Energy (NYSE: CRGY) extracts oil and natural gas from underground reservoirs in Texas and the Rocky Mountains.
Why Will CRGY Beat the Market?
- Market share has increased this cycle as its 41.5% annual revenue growth over the last five years was exceptional
- Superiority of its unit economics leads to a premier gross margin of 59%
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Crescent Energy’s stock price of $11.57 implies a valuation ratio of 4.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
