These Two Canadian Energy Services Stocks Will Benefit As Oil Prices Keep Rising

Oil and Gas Producer Vermilion Energy Announces Strategic Acquisition of Westbrick Energy
Published on: Oct 10, 2024
Author: Caroline Kong

Oil prices continue to rise after recording a cumulative increase of 11.4 per cent over the past month, owing to geopolitical tensions and greater demand for basic energy consumption as a result of catastrophic weather in the United States.

Because prices are likely to continue to move higher for the foreseeable future, now should be a good time for Canadian investors to buy energy stocks, such as Secure Energy Services (TSX:SES) and CES Energy Solutions (TSX:CEU), both remain undervalued and are suited for long-term investment.

Secure Energy Services Stock

Secure Energy Services is a key player in Canada’s midstream energy sector, providing vital waste management and environmental services to North American oil and gas producers. The company’s stock price does not follow commodity price fluctuations, instead generate steady recurring revenue through its network of strategically located facilities. The focus on essential services, combined with a five-year diluted earnings per share (EPS) compound annual growth rate (CAGR) of 73.7% and a ten-year revenue CAGR of 17.9%, makes this energy stock a top pick for growth-seeking investors.

It’s worth pointing out that despite its strong revenue and earnings growth performance, Secure Energy is undervalued, with a forward price-to-earnings (PE) ratio of 16.7 times and price-earnings-to-growth ratio (PEG) as low as 0.2, implying that the market is underestimating the company’s earnings growth potential.

Secure Energy pays a quarterly dividend to investors with a dividend yield of 2.9% per annum. While regulatory changes and competition could pose potential risks, the company’s strong fundamentals and stable revenue streams position it for continued growth. Over the past month, Secure Energy stock has seen a 21.3% return on investment.

CES Energy Solutions Stock

CES Energy Solutions is a leading provider of critical chemical solutions to the oil and gas industry. From drilling and completions to production and transport, CES products and services are essential throughout the oilfield lifecycle, which means continued demand and strong growth potential. The company’s five-year diluted EPS is growing at a 48% CAGR and its ten-year revenue is growing at a 10.8% CAGR.

CES stock trades at a forward P/E of 8.9x and a P/B of just 0.7x, which is undervalued relative to its earnings growth potential. In addition, the company’s asset-light business model allows it to generate strong free cash flow, which it returns to shareholders through a growing dividend (currently yielding 1.6%) and an aggressive share buyback programme.

The company’s focus on its basic chemicals business and its solid financial position make it an attractive option for long-term growth-oriented investors. So far this year, CEU stock has generated a total return of 129.1 per cent for investors.

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