Consumers rely on energy companies for utilities, transportation, and other essentials. Many companies in this industry don’t have the highest valuations and tend to be safer investments.
Energy is one of the last expenses consumers cut. People will still travel in their cars and pay to fill up their gas tanks. People in electric vehicles will continue to charge their cars with electricity to travel.
Energy stocks can fluctuate as commodity prices change, and these fluctuations are more apparent for stocks in the renewable energy space. Investors can spread their funds across many assets to diversify their portfolios and reduce risk. These are three of the top energy stocks to consider for the long run.
Exxon Mobil (XOM)
Exxon Mobil (NYSE:XOM) is a gasoline juggernaut that rewards investors with high dividends and profitability. The company stands to benefit if oil prices rise due to inflation.
Exxon Mobil has the financial flexibility to make big investments, and a potential acquisition can increase the company’s total market share. XOM is reportedly closing in on a Pioneer acquisition.
Pioneer Natural Resources (NYSE:PXD) has a $55 billion market cap, and Exxon Mobil plans to acquire it for nearly $60 billion. The deal still has to receive approval, but it shows Exxon is still in growth mode.
The acquisition can help Exxon Mobil corner the shale market and become a top player in the industry. While investors wait for a deal to play out, they get to hold onto a stock with a 3.35% dividend yield. Exxon Mobil shares have gained 32% over the past five years and are roughly flat year to date (YTD).
First Solar (FSLR)
Solar energy stocks have struggled recently, and First Solar (NASDAQ:FSLR) is one of several stocks that highlights this trend. Shares have only gained 2.50% YTD. However, the stock’s more impressive 228% gain over the past five years makes it worth a closer look.
Among the ten largest solar manufacturers, First Solar is the only U.S. headquartered company that does not manufacture solar panels in China. The lack of reliance on China is important to note if geopolitical tensions or supply chain issues rise in the future. Also, the company’s lack of exposure in China can help shares gain momentum if the company decides to expand operations.
First Solar faces industry-related challenges. Yet it finds itself at an attractive valuation if it can maintain growth rates for another year. The company’s 102 P/E ratio is too high for excitement, but First Solar’s forward P/E ratio of 11 gives investors a reason to be excited.
The company’s financials have been strong, despite the stock dropping by roughly 30% since mid-August. In the second quarter, First Solar reported $811 million in net sales and net income of $171 million. Both numbers represent 30.5% and 205.7% year over year (YOY) growth rates, respectively.
Enphase Energy (ENPH)
Enphase Energy (NASDAQ:ENPH) is another promising renewable energy stock that has experienced hardships but now has an attractive valuation.
ENPH is a global energy technology company that is a top supplier of solar-plus-storage systems. The company helps its customers with solar energy generation, storage, control, and management.
Shares have dropped by over 50% YTD but have gained almost 2,500% over the past five years. The company’s $16 billion market cap suggests plenty of room to expand if the company continues to deliver strong financials.
Enphase Energy generated $711.1 million in Q2 revenue and a GAAP net income of $157.2 million. These figures represent 34.1% and 104.2% YOY growth, respectively. Revenue and earnings growth have been robust over the past few quarters despite the stock’s YTD performance.
Shares currently trade at a 30 P/E ratio., and the company’s forward P/E ratio sits at 18. It wasn’t long ago when Enphase Energy traded at over $300/share. ENPH may return to those levels within a few years if it continues on its currently growth pace and solar power headwinds fade away.
On the date of publication, Marc Guberti 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.
