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3 Top Small-Cap Value Stocks for Energy Rebound in 2025

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For Wall Street, 2024 has been a story of triumph, fueled by robust economic growth and easing inflation. The S&P 500 has surged 29.5% year to date, reaching record highs over 50 times.

Amid this bullish wave, the Oil/Energy sector has struggled, delivering just 4.4% in total returns — far below the broader market’s performance. Yet, this underperformance offers a unique opportunity. Several oil stocks appear poised for a rebound in 2025, making this an opportune moment for investors to fortify their energy portfolios.
 

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For those seeking value in a recovering sector, three standout small-cap players deserve attention — Tullow Oil (TUWOY - Free Report) , Nine Energy Service (NINE - Free Report) and Flotek Industries (FTK - Free Report) . These companies combine attractive valuations with potential upside, positioning them as compelling choices for savvy investors looking to capitalize on energy’s potential revival. Now might be the perfect time to strike while the iron is cooling.

Energy’s Struggles Amid the S&P 500 Surge

While the S&P 500 thrives, the energy sector has stumbled in 2024, rattling even seasoned investors. Crude prices currently hover around $70 per barrel, nearly 20% below April’s peak, reflecting ongoing global challenges. OPEC has lowered its 2024 oil demand growth forecast for the fifth straight month, now projecting 1.61 million barrels per day, down 27% since July. Sluggish data and a cooling Chinese economy continue to cast a shadow over the sector, leaving energy as one of the S&P 500’s few laggards. Amid broader market success, the sector’s struggles underscore the volatility of global energy markets.

Why Value Stocks Deserve a Closer Look

In times of market uncertainty, value stocks stand as a beacon for investors seeking stability and long-term growth. Rooted in buying undervalued assets, value investing has consistently delivered strong results, often outperforming growth stocks while exhibiting less volatility.

For risk-averse investors, this strategy offers a chance to acquire overlooked stocks trading at attractive prices, creating a margin of safety. To unlock even greater potential, consider small-cap stocks. These hidden gems, often neglected by larger market players, can yield significant returns for those willing to dig deeper.

In a market fraught with hesitation, value stocks offer not just an opportunity but a pathway to resilience. As others chase trends, you could quietly build a portfolio primed for sustainable success.

Small-Cap Stocks: A Gateway to High Growth

Small-cap stocks, typically valued at $1 billion or less, have a unique allure for investors with an eye on growth. History shows that many of today’s corporate giants started small, offering early investors massive returns. These under-the-radar gems often hold the potential to become the next market darlings, delivering multibagger returns over time.

Yet, small-cap investing is not without risk. These stocks are more volatile than their large-cap counterparts, making them a double-edged sword. However, in the current landscape, their appeal grows stronger. 

While small businesses have faced challenges from the pandemic, inflation and supply-chain disruptions, President-elect Trump’s tariffs aim to boost U.S. industries by making imported goods costlier, benefiting domestic firms. Additionally, lower interest rates could ease financial pressure, helping small businesses that rely on affordable credit and operate with thin profit margins.

Interestingly, the energy sector’s recent struggles have pushed several mid-cap companies into the small-cap category. These firms, despite their size reduction, often retain solid fundamentals, creating opportunities for savvy investors.

For those seeking high-growth potential and willing to navigate volatility, small-cap stocks could be the stepping stone to future wealth in today’s ever-evolving market.

Our Choices

For investors seeking significant returns, small-cap value stocks stand out as a compelling option. These stocks often yield exponential gains over time, driven by their inherent volatility and higher potential for price appreciation.

Unlike industry giants, many small-cap stocks require a closer evaluation to identify the right opportunities. That’s where the Zacks Rank system shines, offering a dependable method to pinpoint companies with robust fundamentals. This tool provides confidence to investors across various risk tolerances and trading styles. To learn more about how you can use this proven system for market-beating gains, visit Zacks Rank Education.

Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best opportunities in the value investing space. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tullow Oil: It is a London-based hydrocarbon producer and explorer, focusing mainly on Africa. TUWOY’s significant positions in discovered and emerging basins and focus on capital discipline should result in a noticeable improvement in profitability. In particular, the oil and gas finder’s operational excellence and technical expertise stand it in good stead.

Notably, the Zacks Consensus Estimate for Tullow Oil’s 2024 earnings per share indicates 20% year-over-year growth. This Zacks Rank #2 firm has a Value Score of A. Tullow Oil’s current market cap is roughly $320.9 million.

Nine Energy Service: It specializes in offering completion solutions to energy firms within North America and abroad. With a footprint in every major North American basin, the company has a diverse, blue-chip customer base with minimal concentration. NINE is distinguished by its years of experience, strong dedication to delivering intelligent, tailored solutions, and the use of world-class resources to enhance efficiencies.

Over the past 60 days, the Zacks Consensus Estimate for NINE’s 2024 earnings has moved up 9%. This #2 Ranked oilfield service provider has a Value Score of B. Nine Energy Services’ current market cap is roughly $41.1 million.

Flotek Industries: It is a leading chemistry and data technology company serving energy and industrial markets globally. Flotek leverages over 170 patents and two decades of field and lab data to deliver innovative solutions. Operating through its Chemistry Technologies and Data Analytics segments, the company enhances operational efficiency and environmental performance for hydrocarbon producers, oil and gas companies, and renewable energy sectors through optimized chemistry and near real-time data insights.

Notably, the Zacks Consensus Estimate for Flotek Industries’ 2024 earnings per share indicates 125% year-over-year growth. This Zacks Rank #2 firm has a Value Score of B. Flotek Industries’ current market cap is roughly $248.8 million.


See More Zacks Research for These Tickers


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Tullow Oil PLC (TUWOY) - free report >>

Flotek Industries, Inc. (FTK) - free report >>

Nine Energy Service, Inc. (NINE) - free report >>

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