Heightened Middle East tensions are propelling oil prices upward. Consequently, it could be wise to invest in resilient energy stocks, NCS Multistage Holdings, Inc. (NCSM), NOW Inc. (DNOW), and Ranger Energy Services, Inc. (RNGR), all indicating bullish trends this week.
Let's understand this in detail.
The escalating conflict between Israel and Hamas has triggered a surge in global oil prices, stoking apprehensions of a broader Middle East unrest imperiling the world's oil reserves. S&P Global warns of the potential for oil to surpass the $100 per barrel mark, a significant surge from its present $87.
S&P Global also reported that new U.S. sanctions on Iran and looming threats to Middle East shipping and infrastructure could jeopardize 500,000 barrels per day of Iranian oil exports. This is concerning as the global oil supply was already strained pre-conflict, and any disruption could have far-reaching ramifications on the global economy.
Further, Bob McNally, President of Rapidan Energy Group, forecasts that an Israel-Iran conflict could swiftly elevate oil prices by $5 to $10. This alarming possibility is rooted in the fact that the Strait of Hormuz, situated between Oman and Iran, handles a significant 40% of global exports and stands as the most critical oil transit chokepoint worldwide.
McNally further asserts that the escalation in crude prices could potentially go “much higher” if Hezbollah, the Lebanese militant group, becomes involved. He emphasized, "The real concern for the oil market, triggering a substantial price surge, lies in the perceived risk of the conflict spreading to Hezbollah in Lebanon."
In light of these trends, let’s look at the fundamentals of the three best Energy - Services stocks, beginning with number 3.
Stock #3: NCS Multistage Holdings, Inc. (NCSM)
NCSM delivers engineered products and comprehensive support services to advance the construction, completion, and field development strategies of oil and natural gas wells. Its offerings encompass fracturing systems, enhanced recovery solutions, precision repeat products, radioactive tracer diagnostics, and well construction components.
In terms of forward EV/Sales, NCSM is trading at 0.35x, 84% lower than the industry average of 2.17x. Also, its forward EV/EBITDA multiple of 2.98 is 48.7% lower than the 5.81 industry average. In addition, the stock’s forward Price/Sales of 0.23x compares with the industry average of 1.53x
For the six months that ended June 30, 2023, NCSM’s total Canada revenue increased 8.7% year-over-year to $44.99 million. The company’s total revenues grew 3.6% from the year-ago value to $68.95 million. As of June 30, 2023, NCSM’s cash and cash equivalents amounted to $13.75 million, while total current assets came in at $85.30 million.
The consensus revenue estimate of $190.92 million for the fiscal year ending December 2024 reflects an 11% year-over-year improvement. Likewise, the consensus EPS estimate of $3.13 reflects a 122.9% rise from the prior year. NCSM’s shares plunged 1.1% intraday to close the last trading session at $15.58.
NCSM’s positive fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
NCSM has an A grade for Momentum and a B for Value, Sentiment, and Quality. It has ranked #4 out of 59 stocks within the B-rated Energy - Services industry.
In addition to the POWR Ratings I’ve just highlighted, you can see NCSM’s ratings for Growth and Stability here.
Stock #2: NOW Inc. (DNOW)
DNOW distributes products to the oil, gas, and industrial sectors. The company provides energy and industrial goods, along with meticulously engineered processes and production equipment. It operates under the brands DistributionNOW and DNOW, with segments spanning the United States, Canada, and the International market.
In terms of forward non-GAAP P/E, DNOW is trading at 12.27x, 29.6% lower than the industry average of 17.43x. Furthermore, its forward EV/Sales multiple of 0.47 is 71.5% lower than the 1.67 industry average. Additionally, the stock’s forward EV/EBITDA of 6.01x compares with the industry average of 11.01x.
During the second quarter that ended June 30, 2023, DNOW’s revenue increased 10.2% year-over-year to $594 million. Its operating profit rose 24.1% from the year-ago value to $36 million. Also, net income and EPS attributable to DNOW stockholders grew 30.8% and 34.8% from the prior year’s period to $34 million and $0.31, respectively.
The consensus revenue estimate of $2.35 billion for the fiscal year ending December 2023 reflects a 10.1% year-over-year improvement. Likewise, the consensus EPS estimate of $0.98 reflects a 2.6% rise from the prior year. Also, the company topped the consensus revenue estimates in all four trailing quarters.
Over the past six months, DNOW has gained 11.9%, closing the last trading session at $11.96.
DNOW’s solid outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
DNOW has an A grade for Momentum and a B for Value, Sentiment, and Quality. It has ranked #3 out of 59 stocks within the Energy – Services industry.
Click here to access additional DNOW ratings for Growth and Stability.
Stock #1: Ranger Energy Services, Inc. (RNGR)
RNGR offers high-specification well service rigs, wireline services, and supplementary processing solutions, along with ancillary services. The company's segments encompass High Specification Rigs; Wireline Services; and Processing Solutions and Ancillary Services.
In terms of forward non-GAAP P/E, the stock is trading at 9.46x, 9% lower than the industry average of 10.39x. Its forward EV/Sales of 0.56x is 74.3% lower than the 2.17x industry average. In addition, RNGR’s forward Price/Sales multiple of 0.52 is 66% lower than the 1.53 industry average.
During the second quarter that ended June 30, 2023, RNGR’s total revenue increased 6.3% year-over-year to $163.20 million. Its adjusted EBITDA grew 21.7% from the year-ago value to $21.90 million.
In addition, the company’s net income and income per common share came in at $6.10 million and $0.24, compared to a net loss and loss per common share of $0.40 million and $0.02 in the prior year’s period.
Analysts expect RNGR’s revenue to grow 7.7% year-over-year to $655.35 million for the fiscal year ending December 2023. Similarly, the company’s EPS for the ongoing year is estimated to come in at $1.47, indicating a 51.7% year-over-year improvement. The stock has gained 52.4% over the past year, closing the last trading session at $13.90.
RNGR’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
RNGR has an A grade for Momentum and a B for Growth and Value. It is ranked #2 within the same industry.
Click here to access the additional RNGR ratings (Sentiment, Quality, and Stability).
What To Do Next?
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DNOW shares were trading at $11.92 per share on Wednesday afternoon, down $0.04 (-0.33%). Year-to-date, DNOW has declined -6.14%, versus a 14.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
3 Energy Stocks With Bullish Signals This Week StockNews.com
