Energy stocks have sharply outperformed the broader market over the past year: the Vanguard Energy ETF (VDE) returned 93.61%, compared with a 23.88% total return for the S&P 500. The sector spans businesses with very different exposure to supply, costs and policy, so the ETF’s performance alone says little about the prospects of an individual company.
The sector spans oil and gas as well as renewables
Energy companies generally fall into two broad groups. Traditional energy firms produce and distribute finite resources such as coal, natural gas and oil. Renewable energy companies generate power from sources including solar, wind and hydropower.
Exxon Mobil, Marathon Petroleum, Chevron and ConocoPhillips are among the best-known large companies in traditional energy. Renewable firms, by contrast, derive most of their revenue from producing and distributing cleaner power. Global demand supports both parts of the sector, while attention to climate change and global warming can also shape the operating environment and interest in clean energy.
Companies vary widely in size and business mix. Some grow through acquisitions, while others may themselves become takeover targets. Deals can alter a company’s assets and operations, as well as the value of shareholders’ stakes. Investors assessing an individual stock need to consider its business and market conditions rather than infer its performance from the sector’s overall return.
Earnings, valuation and dividends offer useful reference points
Earnings per share (EPS), typically calculated by dividing net income by shares outstanding, is a measure of profitability. Comparing EPS with a company’s own history and its industry can help put changes in earnings into context, though a single period’s figure does not establish future performance.
The price-to-earnings ratio (P/E) is commonly used to assess a share price relative to earnings and compare valuations. Those comparisons should also account for a company’s growth, business model and operating conditions; a lower P/E does not automatically mean a higher return.
Dividend yield is another consideration for energy stocks. Some companies pay shareholders quarterly or annually, but dividend levels can change with business conditions and company policy. Tracking per-share payments and yield can show how distributions are evolving, but past dividends do not guarantee that a company will maintain them.
Screening tools and trading platforms serve different needs
Online brokerages often offer stock screeners that let users narrow results using criteria such as share price. Platforms named in the source include Interactive Brokers, Plus500 Yield, Public.com, Robinhood and TradeZero. They are aimed at different groups, including global and active traders, leveraged traders, users seeking trading ideas, mobile commission-free investors and active short sellers. Features and availability vary, so users should check the specific products and service terms.
When screening energy stocks, investors should look beyond EPS, P/E and dividend yield to identify where a company’s revenue comes from. Oil and gas producers and refiners are exposed to traditional energy markets; renewable firms depend on the operation and distribution of wind, solar or hydropower projects. An ETF’s return is a sector-wide reference, not a substitute for examining an individual company’s finances and business.
Past returns do not establish future performance
The historical figures cited in the source show energy stocks rising 54% in 2022. The source’s Q&A section also refers to experts who saw further room for gains, but that is a market view, not a promise of future returns. VDE’s 93.61% return over the past 12 months is also historical and cannot, by itself, indicate what comes next.
Assessing an energy stock means identifying its business segment, reviewing earnings, valuation and dividends, and monitoring acquisitions and operational changes. The available information does not provide individual stock tickers, share prices or growth rankings, so it does not support a list of the sector’s best-performing stocks.