Energy stocks have been under the spotlight as global energy demand continues to rise while valuations in the sector remain attractive. Despite strong earnings and cash flows, many oil, gas, and renewable companies are trading at discounted valuations.
Therefore, investors looking to invest in undervalued energy stocks might consider adding Weatherford International plc (WFRD), VAALCO Energy, Inc. (EGY), and Matrix Service Company (MTRX), which are poised for potential growth.
In 2025, the energy sector, particularly traditional oil and gas companies, stands to benefit from rising commodity prices driven by tight supply and recovering global demand, increased geopolitical risks, and a new investment wave in offshore production. Many undervalued energy companies leverage this demand rebound while improving operational efficiencies to drive profitability.
The offshore drilling market is poised to grow at a CAGR of 8.4%, reaching a market value of $46.27 billion in 2028. With the growing population, the rising demand for natural gas and oil is the reason for such growth.
With the sector shifting towards more capex-intensive technologies, such as renewables, higher investments are expected. The transition to cleaner energy sources is creating investment opportunities in firms involved in solar, wind, and battery technologies. The energy sector investments are projected to reach $3.2 trillion by 2040.
Looking ahead, the energy sector remains a compelling option for investors seeking value and growth. Let’s discuss the fundamentals of the above-mentioned stocks in detail:
Weatherford International plc (WFRD)
WFRD is an energy services company that provides equipment and services for drilling, evaluation, completion, production, and intervention in oil, geothermal, and natural gas wells worldwide. The company operates through three segments: Drilling and Evaluation; Well Construction and Completions; and Production and Intervention.
On November 7, WFRD announced receiving an award for a three-year contract for providing rigless services as part of the reactivation of ADNOC onshore strings. Under this contract, ADNOC will be able to maximize well productivity while minimizing downtime and operational risks, leveraging WFRD’s expertise.
In terms of forward GAAP P/E, WFRD is trading at 10.62x, 14.9% lower than the industry average of 12.47x. Likewise, the stock’s forward EV/Sales and EV/EBIT multiples of 1.12 and 6.25 are 43.1% and 40.2% lower than their respective industry averages of 1.97 and 10.45.
For the fiscal 2024 third quarter that ended on September 30, WFRD’s total revenues increased 7.3% year-over-year to $1.41 billion. Its operating income rose 11.5% year-over-year to $243 million. In addition, the company’s net income amounted to $157 million, or $2.06 per share, reflecting increases of 27.6% and 24.1% year-over-year, respectively.
WFRD’s adjusted EBITDA improved 16.4% from the prior year’s value to $355 million. Also, its adjusted free cash flow grew 34.3% from the year-ago value to $184 million.
Street expects WFRD’s revenue for the fiscal year (ending December 2024) to increase 8.6% year-over-year to $5.58 billion. Its EPS for the same period is expected to register a 22.7% growth from the prior year, settling at $6.95.
The stock has declined 3.1% intraday to close the last trading session at $71.48.
WFRD’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
WFRD has a B grade for Value and Quality. It is ranked #8 out of 76 stocks in the Energy - Oil & Gas industry. Click here to see the additional ratings for WFRD (Growth, Momentum, Stability, and Sentiment).
VAALCO Energy, Inc. (EGY)
EGY is an independent energy company with a diverse production, development, acquisition, and exploration portfolio of crude oil, natural gas, and natural gas liquids across Gabon, Egypt, Equatorial Guinea, and Canada.
On December 11, EGY announced executing a contract with Borr Jack-Up XIV Inc., an affiliate of Borr Drilling Limited (BORR), to drill multiple development wells and appraisal/exploration wells. This contract is in conjunction with EGY’s drilling program to enhance production and add reserves.
In terms of forward non-GAAP P/E, EGY is trading at 5.64x, 52.5% lower than the industry average of 11.88x. Likewise, the stock’s forward EV/Sales and Price/Cash Flow multiples of 0.98 and 3.00 are 50.5% and 4.7% lower than the industry averages of 1.97x and 5.33x, respectively.
During the third quarter that ended on September 30, 2024, EGY’s revenue increased 20.7% year-over-year to $140.33 million. The company’s operating income came in at $44.08 million, reflecting an increase of 24% from the prior-year quarter. Its adjusted net income amounted to $7.93 million or $0.08 per share, up 6.2% and 14.3% year-over-year. Also, adjusted EBITDAX grew 30% from the year-ago value to $92.76 million.
The consensus revenue estimate of $121.34 million for the fiscal first quarter (ending March 2025) represents a 21.2% increase year-over-year. The consensus EPS estimate of $0.10 for the same quarter indicates a 42.9% improvement year-over-year. The company has an excellent surprise history; it surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
EGY shares have surged 2.9% over the past year to close the last trading session at $4.60.
EGY’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.
It also has an A grade for Quality and a B for Value. Within the Energy - Oil & Gas industry, it is ranked #11 out of 76 stocks. Click here to see EGY’s ratings for Growth, Momentum, Stability, and Sentiment.
Matrix Service Company (MTRX)
MTRX provides engineering, fabrication, construction, and maintenance services to support critical energy infrastructure and industrial markets internationally. The company operates through three segments: Storage and Terminal Solutions; Utility and Power Infrastructure; and Process and Industrial Facilities.
On November 12, MTRX was awarded engineering, fabrication, and construction work for the inner steel tank scope of work on a 100,000 m3 full containment storage tank with Cashman Preload Cryogenics for Delaware River Partners. This award should help expand the company's global footprint.
In terms of forward EV/Sales, MTRX is trading at 0.29x, which is 85.5% lower than the industry average of 2.00x. The stock’s forward Price/Sales ratio of 0.40x is 74.3% below the industry average of 1.56x.
MTRX's revenue for the first quarter of 2025, which ended on September 30, amounted to $165.58 million. Its gross profit for the quarter came in at $7.81 million. As of September 30, 2024, MTRX’s cash and cash equivalents reached $124.61 million, with total assets amounting to $470.16 million as of September 30, 2024.
Analysts expect MTRX’s revenue for the fiscal year 2026 (ending June 2026) to grow by 13.8% from the prior year to $1.04 billion, and its EPS for the same period is expected to come in at $1.04.
Over the past year, the stock has surged 25.6%, closing the last trading session at $12.83.
It’s no surprise that MTRX has an overall rating of B, equating to a Buy in our POWR Ratings system. It has a B grade for Value and Momentum. Out of 53 stocks in the Energy - Services industry, MTRX is ranked #9.
Beyond what is stated above, we’ve also rated MTRX for Growth, Stability, Sentiment, and Quality. Get all MTRX ratings here.
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WFRD shares were trading at $71.88 per share on Tuesday afternoon, down $1.86 (-2.52%). Year-to-date, WFRD has declined -26.13%, versus a 28.14% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
