7 Under-the-Radar Energy Stocks With 40% Upside Potential
With dramatic changes materializing in the world in recent years, the risky but compelling case for under-the-radar energy stocks to buy has never been stronger. Fundamentally, if last year’s (and still ongoing) geopolitical crisis taught us anything, it’s that dependency on unreliable partners may deliver short-term gains at the expense of long-term consequences.
Of course, back during the heat of battle last year, many investors piled into the top players of the resource sector. However, with some cooling off lately, now may be the best time to consider under-the-radar energy stocks to buy. Absolutely, these ideas carry a higher risk profile. But at the end of the day, they can deliver monstrous gains. How big, you might ask?
Among the ideas that Wall Street analysts cover (we’re talking about under-the-radar energy stocks, after all), the average upside target comes out to a whopping 43.9%. Now, I’m just going to go with 40% to make it nice and even. No matter how you cut it, though, we’re talking about serious potential returns.
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Epsilon Energy (EPSN)
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Headquartered in Houston, Texas, Epsilon Energy (NASDAQ:EPSN) ranks among the under-the-radar energy stocks tied to the independent oil and natural gas industry. Specifically, the company specializes in on-shore projects. Currently, Epsilon carries a market capitalization of $149.2 million. EPSN performed well in 2022, with shares up over 13% in the trailing year.
Unfortunately, analysts don’t yet cover Epsilon. However, that could change soon. For instance, the company enjoys an excellent financial framework. According to Gurufocus.com, the hydrocarbon energy specialist commands nine good signs with no yellow or red flags. That’s a rarity for this investment resource. Among the positive attributes are fiscal strength, low bankruptcy risk, and an undervalued profile relative to sales.
Other prominent attributes include a zero-debt balance sheet, strong revenue growth, and outstanding profit margins. Its return on equity stands at 40.5%, meaning it enjoys superior business quality. For all this, the market prices EPSN at less than 5 times trailing earnings, below the sector median of 8 times. Thus, EPSN is easily one of the under-the-radar stocks with massive upside potential.
Profire Energy (PFIE)
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Plying its trade in the oilfield technology sector, Profire Energy (NASDAQ:PFIE) specializes in the design of burner-management systems and other combustion-management technologies. These solutions serve both the upstream (exploration and production) and midstream (storage and transportation) sectors of the hydrocarbon energy industry.
Currently, Profire carries a diminutive market cap of under $52 million. Therefore, it natively ranks among the under-the-radar energy stocks to buy. And buy you should, at least according to Wall Street analysts. Presently, these experts rate PFIE a consensus moderate buy. Even more impressive, the analysts (there are only two, just to be fair) assigned an average price target of $2. This implies an upside of nearly 82%.
Also, hedge funds have been slowly building a position since the fourth quarter of 2021. Looking at the financials, Gurufocus.com identifies PFIE as significantly undervalued based on its proprietary calculations for fair market value. In addition, Profire features a strong balance sheet, particularly a robust cash-to-debt ratio of 48.6 times.
Adams Resources & Energy (AE)
Listed in the Russell 2000 index, Adams Resources & Energy (NYSEAMERICAN:AE) engages in the marketing of crude oil, natural gas, and liquid chemical products. Headquartered in Houston, Texas, Adams Resources probably isn’t well known outside of those focused on under-the-radar energy stocks. With a market cap of only $99.2 million, it’s not posting mainstream headlines.
Nevertheless, the company does enjoy grassroots support, catching the eye of two covering analysts. The two of them peg AE as a consensus moderate buy. Enticingly, they also provide an average price target of $53.75. Against the current level at the time of writing, this forecast implies a return of nearly 33%. That’s quite remarkable considering that in the trailing year, AE shares already gained 36%.
Nevertheless, Adams Resources isn’t about to lose its street cred as one of the under-the-radar energy stocks. Per Gurufocus.com’s proprietary FMV calculations, AE rates as modestly undervalued. Objectively, the market prices AE at 0.06 times trailing-12-month (TTM) sales. In contrast, the industry median is 1.03 times.
NuScale Power (SMR)
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At the start of last year, the Washington Post reported that Germany was shutting down additional nuclear power plants. Back then, it might have seemed like the right move among policymakers. Of course, soon after, Russia invaded Ukraine, sparking an ongoing geopolitical crisis. If a lesson exists here, it’s that no one should dismiss any energy source.
That’s why I believe NuScale Power (NYSE:SMR) represents one of the under-the-radar energy stocks to buy. Forwarding an innovation called small modular reactors, NuScale’s nuclear facilities feature a small footprint (relative to their traditional counterparts). Effectively, this tech allows SMRs to be deployed closer to sources of demand, facilitating greater efficiencies. As well, NuScale incorporates advanced safety protocols, soothing concerns about proper operations.
On the fundamental side, nothing comes close to the remarkable energy density of nuclear fuel. For instance, one uranium fuel pellet creates as much energy as 17,000 cubic feet of natural gas. It’s almost inevitable that policymakers will wake up to this harsh reality. Turns out, the one analyst that covers SMR gave it a $13 price target. This implies a 22.6% return, making it one of the potentially viable energy stocks to buy.
NACCO Industries (NC)
Headquartered in Cleveland, Ohio, NACCO Industries (NYSE:NC) on its website states that it delivers reliable mining and environmental solutions that enable communities to thrive. Through its subsidiaries, NACCO offers aggregates, minerals, reliable fuels, and environmental solutions. Presently, the company carries a market cap of a bit under $280 million. Therefore, it’s not completely unknown, though it makes for one of the under-the-radar energy stocks to consider.
In the trailing year, NC shares gained almost 11%, a respectable performance considering the circumstances. However, right now, investors may be able to secure a discount. In the trailing month, NC dipped around 7%. On the financial side of the narrative, Naccco features a modestly undervalued investment profile, per Gurufocus.com. For a more objective deduction, NC’s Shiller price-earnings ratio sits at 7.7 times. In contrast, the sector median is over 17 times. As well, the market prices NC at 0.67-times book value, slipping well below the median value of 1.49 times. Finally, Naccco enjoys a solid balance sheet, with favorable cash-to-debt and equity-to-asset ratios. Thus, it’s worth consideration among under-the-radar energy stocks.
Alliance Resource Partners (ARLP)
Based in Tulsa, Oklahoma, Alliance Resource Partners (NASDAQ:ARLP) is the second-largest coal producer in the eastern U.S., per its website. Further, Alliance generates operating income from the production and marketing of coal and royalty income from coal and oil and gas mineral interests. While it’s one of the more compelling under-the-radar energy stocks, the company structures itself as a master limited partnership. Because MLPs feature complex tax requirements, investors should consider the implications of this before moving forward.
If you do decide to take a shot with ARLP, the underlying investment features an objectively undervalued profile. In particular, the market prices shares at 3.4 times forward earnings, comparing favorably to the industry median of just under 4 times. As well, Alliance’s Shiller PE ratio pings at 6.1 times, well below the sector median of 17.4 times. Now, another warning is that Gurufocus.com labels Alliance as a possible value trap. But that may not be the final word. Currently, ARLP enjoys a strong buy consensus view. As well, the experts peg their average price target at $28.67, implying 45.5% upside.
Arch Resources (ARCH)
To close out this list of under-the-radar energy stocks with 40% average upside potential, we’re heading to Missouri. That’s where Arch Resources (NYSE:ARCH) maintains its headquarters. Specializing in the coal mining and processing sector, Arch might seem anachronistic. However, in 2021, coal provided 21.9% of all utility-scale electricity. Therefore, Arch and its ilk remain surprisingly relevant.
As with Alliance above, Gurufocus.com has some warnings about ARCH. In particular, the investment resource argues that the stock’s significantly overvalued relative to fair market value. Objectively, though, the market prices ARCH at only 2.6 times trailing earnings. For comparison, the industry median stat stands at 4.5 times. In addition, Arch enjoys strong profitability metrics, especially its net margin of 29.6%. This beats out over 80% of the competition.
Finally, the two analysts that cover ARCH like the opportunity, rating it a consensus moderate buy. As well, they see an average price target of $185.50, implying 37% upside potential. Therefore, if you’re willing to get your hands dirty, ARCH represents one of the under-the-radar energy stocks to buy.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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