Excelerate Energy has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 14.2% to $32.74 per share while the index has gained 10.9%.
Is now the time to buy Excelerate Energy, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Excelerate Energy Not Exciting?
We’re sitting this one out for now. Here are two reasons you should be careful with EE, plus one stock we’d rather own.
1. Fewer Distribution Channels Limit Its Ceiling
The scale of a company’s revenue base is an important lens through which to view the topline, as it signals whether a producer has gone from a vulnerable commodity taker into a durable operating platform. Larger producers generate revenue across many wells, pads, takeaway routes, and geographies rather than relying on a single field or drilling program.
Excelerate Energy’s $1.35 billion of revenue in the last year is pretty small for the industry, suggesting the company hasn’t hit a level of diversification where investors can sleep easy at night.
2. Low Gross Margin Reveals Weak Structural Profitability
In any given year, energy gross margins are heavily influenced by prices, hedging, and cost inflation, but over a full cycle these gross margins reveal which producers are structurally advantaged through superior “rock” quality, infrastructure access, and cost position.
Excelerate Energy, which averaged 29.5% gross margin over the last five years, exhibited bottom-tier unit economics in the sector. It means the company will struggle at higher commodity prices than peers with better gross margins.
Final Judgment
Excelerate Energy isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 18.6× forward P/E (or $32.74 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We’re pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at an all-weather company that owns household favorite Taco Bell.
Stocks We Would Buy Instead of Excelerate Energy
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