Energy consumption worldwide will increase rapidly, driven by rapid urbanization and population and economic growth. Simultaneously, demand for energy solutions, including oilfield services, products, technology, and systems from oil & gas production and exploration companies, is increasing.

Considering these factors in mind, it could be wise to invest in quality energy stocks, Ranger Energy Services, Inc. (RNGR) and Forum Energy Technologies, Inc. (FET) for potential gains. However, it seems prudent to wait for a better entry point in Solaris Oilfield Infrastructure, Inc. (SOI).

OPEC remains optimistic about global oil demand growth in 2024 and 2025. The organization expects world oil demand to grow by 2.25 million barrels per day (bpd) to a record of 104.36 million bpd. For the next year, global oil demand growth of 1.85 million bpd to 106.21 million bpd is forecasted.

According to the Short-Term Energy Outlook by the U.S. Energy Information Administration (EIA), natural gas consumption in the U.S. is expected to increase by 5% during the first quarter of 2024 compared to the prior year’s quarter.

As per the Business Research Company report, the oil and gas market size is anticipated to grow from $7.19 trillion in 2023 to $7.62 trillion in 2024, exhibiting growth at a CAGR of 6.1%. Also, the market is expected to reach $9.35 trillion by 2028, expanding at a CAGR of 5.2% during the forecast period (2024-2028).

With robust energy demand worldwide, demand for energy services from oil and gas production and exploration companies is surging. The global oilfield services market is expected to total a value of $550.09 billion by 2032, expanding at a CAGR of 6.5% in the forecast period of 2024-2032.

Meanwhile, the Energy as a Service (EaaS) market is exhibiting exemplary growth propelled by various factors like growing emphasis on energy efficiency, rising adoption of renewable energy sources, and the growing demand for cost-effective energy solutions.

The rising awareness and regulatory obligations encouraging the reduction of carbon emissions and promoting sustainability are also among the key drivers of growth. The global Energy as a Service market is projected to reach $140.50 billion by 2030, expanding at a CAGR of 9.6%.

Moreover, the increased integration of advanced technologies such as the Internet of Things (IoT), artificial intelligence (AI), and data analytics is enhancing the capabilities of EaaS offerings.

Given the industry’s robust outlook, let’s look at three Energy – Services stocks, beginning with number three.

Stock #3: Solaris Oilfield Infrastructure, Inc. (SOI)

SOI designs and manufactures mobile proppant management systems used to unload, store, and deliver proppant, water, and chemicals at oil and natural gas well sites. The company is involved in the transloading and storage of proppant or railcars at its transloading facility. It also develops Railtronix, an inventory management software.

On October 25, 2023, SOI’s Board of Directors approved a quarterly cash dividend of $0.12 per share, the second increase to its ordinary dividend in 2023. The dividend was paid on December 11, 2023. The company’s current per share dividend is a 9% increase from the third quarter dividend and a 14% increase from the fourth quarter 2022 dividend.

Since it began returning cash to shareholders in 2018, SOI will have cumulatively returned nearly $158 million via dividends and share repurchases. The company pays an annual dividend of $0.48, which translates to a yield of 6.54% at the current share price. And its four-year average dividend yield is 4.91%.

In terms of forward EV/Sales, SOI is trading at 1.32x, 30.2% lower than the industry average of 1.90x. Likewise, the stock’s forward Price/Sales multiple of 0.78 is 41.6% lower than the industry average of 1.33. However, its trailing-12-month P/E of 9.61x is 2.2% higher than the industry average of 9.40x.

For the third quarter that ended September 30, 2023, SOI reported total revenue of $69.68 million, and its revenue-related parties came in at $5.25 million, an increase of 78% year-over-year. But net income attributable to Solaris and EPS of Class A common stock were $4.93 million and $0.16, down 33.4% and 27.3% from the prior year’s quarter.

As of September 30, 2023, SOI’s total assets were $480.51 million, compared to $462.58 million as of December 31, 2022.

Analysts expect SOI’s revenue for the fiscal year (ended December 2023) to decrease 7.5% year-over-year to $296.11 million. However, the company’s EPS for the same period is expected to grow 22.3% year-over-year to $0.93. Moreover, SOI topped the consensus EPS estimates in three of the trailing four quarters.

Shares of SOI have gained 1.1% over the past month to close the last trading session at $7.53. But the stock has declined 26.2% over the past year.

SOI’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

SOI has a C grade for Growth, Sentiment, Quality, and Stability. It is ranked #14 among 51 stocks in the Energy – Services industry.

In addition to the POWR Ratings we’ve stated above, we also have SOI ratings for Value and Momentum. Get all SOI ratings here.

Stock #2: Forum Energy Technologies, Inc. (FET)

FET designs, manufactures, and distributes products serving the oil, natural gas, industrial, and renewable energy industries globally. The company operates through three segments: Drilling & Downhole; Completions; and Production. It designs, manufactures, and supplies products and offers related services to the drilling, well construction, and artificial lift.

On January 5, 2024, FET completed the acquisition of Variperm Energy Services, a leading manufacturer of customized downhole technology solutions offering sand and flow control products for heavy oil applications. The total consideration relating to the acquisition consists of $150 million of cash and 2 million shares of FET’s common stock.

“This accretive acquisition enhances FET’s downhole and artificial lift product portfolio by adding a leading manufacturer of customized downhole technology solutions in sand and flow control for heavy oil applications. We expect the combined global footprint of FET and Variperm to benefit both legacy FET and Variperm products,” said Neal Lux, President and CEO of FET.

In terms of trailing-12-month EV/Sales, FET is trading at 0.53x, 72% lower than the industry average of 1.88x. The stock’s trailing-12-month EV/EBITDA multiple of 7.02 is 32.3% lower than the industry average of 5.31. Also, its trailing-12-month Price/Sales of 0.24x is 80.8% lower than the industry average of 1.24x.

During the nine months that ended September 30, 2023, FET’s revenue increased 8.7% year-over-year to $553.70 million. Its gross profit grew 11.4% from the prior year’s period to $154.40 million. Its operating income came in at $18.90 million, up 136.2% year-over-year.

In addition, the company’s total current assets came in at $531.20 million as of September 30, 2023, compared to $512.90 million as of December 31, 2022.

Street expects FET’s revenue for the fiscal year 2024 to increase 7.1% year-over-year to $1.21 billion. Over the next five years, the company’s EPS is estimated to grow 132.1% per annum.

Over the past month, the stock has declined 11.1% to close the last trading session at $19.48.

FET’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has a B grade for Momentum and Value. Within the Energy – Services industry, FET is ranked #13 of 51 stocks.

Click here to access additional ratings of FET for Sentiment, Quality, Growth, and Stability.

Stock #1: Ranger Energy Services, Inc. (RNGR)

RNGR offers high-specification onshore well service rigs, wireline completion services, and complementary services to companies engaged in exploration and production. The company operates in three segments: High Specification Rigs; Wireline Services; and Processing Solutions and Ancillary Services.

On June 26, 2023, RNGR announced its selection to join the Russell 3000 Index following the annual reconstitution by FTSE Russell. This inclusion in the broad-market index enhances RNGR’s visibility and exposure to institutional investors and index funds, thereby fueling future growth opportunities.

In terms of forward non-GAAP P/E, RNGR is trading at 7.53x, 25.6% lower than the industry average of 10.12x. Likewise, the stock’s forward EV/Sales multiple of 0.43 is 77.1% lower than the industry average of 1.90. Moreover, its forward Price/Sales of 0.38x is 71.4% lower than the industry average of 1.33x.

RNGR’s revenue and EBITDA have grown at respective CAGRs of 41.3% and 41.2% over the past three years. The company’s tangible book value has increased 42.3% over the same timeframe, while its total assets have improved at a CAGR of 17.7%.

In the nine months that ended September 30, 2023, RNGR’s total revenue increased 6.8% year-over-year to $485.10 million. Its operating income grew 204.7% from the prior year’s period to $32.30 million. The company’s net income was $21.70 million, or $0.86 per share, up 189.3% and 160.6% year-over-year.

Furthermore, the company’s adjusted EBITDA came in at $66 million during the first nine months, indicating an increase of 14% year-over-year.

Analysts expect RNGR’s revenue for the fiscal year (ended December 2023) to increase 4.8% year-over-year to $637.65 million, while its EPS is anticipated to grow 36.1% from the year-ago value to $1.32. For the first quarter (ending March 2024), the company’s EPS is expected to increase 24.5% year-over-year to $0.32.

RNGR’s stock has surged 1.7% over the past month to close the last trading session at $9.94.

RNGR’s POWR Ratings reflect a robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

The stock has an A grade for Value and a B for Momentum. RNGR is ranked #11 out of 51 stocks in the Energy – Services industry.

Click here to access additional POWR ratings of RNGR for Sentiment, Quality, Growth, and Stability.

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SOI shares were unchanged in premarket trading Wednesday. Year-to-date, SOI has declined -5.40%, versus a 3.93% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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