Whether you see them or not, energy businesses play a crucial part in our daily activities, from powering our homes and businesses to powering our transportation and industries.But they are at the whim of volatile macroeconomic factors that influence capital spending (like interest rates and commodity prices), and the industry has underperformed the market over the past six months as its 3.8% return lagged the S&P 500 by 5.1 percentage points.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. On that note, here is one energy stock poised to generate sustainable market-beating returns and two we’re steering clear of.
Two Energy Stocks to Sell:
Kodiak Gas Services (KGS)
Market Cap: $4.77 billion
Dominating the Permian Basin with a fleet focused on large horsepower units exceeding 1,000 horsepower each, Kodiak Gas Services (NYSE:KGS) operates compression equipment that maintains natural gas pressure for production, gathering, and transportation.
Why Are We Cautious About KGS?
- Modest revenue base of $1.39 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Day-to-day expenses have swelled relative to revenue over the last five years as its EBITDA margin fell by 2.3 percentage points
- Poor free cash flow margin of 3.3% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
At $47.21 per share, Kodiak Gas Services trades at 17.5x forward P/E. Check out our free in-depth research report to learn more about why KGS doesn’t pass our bar.
Solaris Energy Infrastructure (SEI)
Market Cap: $4.13 billion
After acquiring Mobile Energy Rentals in 2024 to enter the distributed power market, Solaris Energy Infrastructure (NYSE:SEI) leases mobile power equipment and provides logistics services for oil and gas well completion.
Why Does SEI Worry Us?
- Subscale operations are evident in its revenue base of $762.2 million, meaning it has fewer distribution channels than its larger rivals
- Cash-burning history makes us doubt the long-term viability of its business model
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Solaris Energy Infrastructure is trading at $62.75 per share, or 26.8x forward P/E. Dive into our free research report to see why there are better opportunities than SEI.
One Energy Stock to Watch:
Core Natural Resources (CNR)
Market Cap: $4.48 billion
Tracing its origins to 1864 and operating some mines southwest of Pittsburgh, Core Natural Resources (NYSE:CNR) mines and exports metallurgical coal used in steelmaking and thermal coal for power generation.
Why Could CNR Be a Winner?
- Annual revenue growth of 15.6% over the last ten years was superb and indicates its market share increased during this cycle
- $4.27 billion in revenue gives it scale, which leads to bargaining power with suppliers and retailers
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Core Natural Resources’s stock price of $88.70 implies a valuation ratio of 20.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.