The Smartest Energy Stock to Buy With $500 Right Now

Discover why Total Energy Services’ strong Q3 results, strategic expansion in Asian LNG markets, and cheap valuation make it a standout investment in the energy sector.

| More on:
bulb idea thinking

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

As the energy sector remains volatile in 2025, the time is ripe to identify quality undervalued oil and gas stocks. One such stock is Total Energy Services (TSX:TOT), valued at a market cap of $450 million.

Total Energy Services is a diversified energy services company operating in Canada, the U.S., and Australia. It has four primary business segments: contract drilling services, rentals and transportation services, compression and process services, and well servicing.

Total Energy provides essential services to oil and gas companies, which include specialized equipment rentals, compression solutions, and well-servicing operations.  

Created with Highcharts 11.4.3Total Energy Services + iShares S&p/tsx 60 Index ETF PriceZoom1M3M6MYTD1Y5Y10YALL3 Jan 20203 Jan 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '250www.fool.ca

The TSX stock has returned more than 100% to shareholders in the last five years after adjusting for dividend reinvestments. Let’s see why Total Energy Services is the smartest energy stock to buy with $500 right now.

The bull case for investing in Total Energies stock

Total Energies delivered an impressive quarter in Q3 2024, demonstrating why it is a compelling investment in the energy services sector. Despite softer market conditions in the U.S., Total Energies increased sales by 4% year over year in Q3, while EBITDA (earnings before interest, tax, depreciation, and amortization) jumped 12% powered by the successful integration of Saxon Australia, improved compression and rental revenue, and a higher fabrication margin.

Total Energies is well diversified as it derives 49% of revenue from Canada, followed by the U.S. and Australia at 34% and 17%, respectively. Further, through its Australian operations, the company disclosed plans to double down on the lucrative liquified natural gas (LNG) market in Asia.

Total Energies recently deployed a new drilling rig and upgraded existing equipment under long-term contracts, with additional upgrades planned for early 2025. Additionally, its CPS (compression and process services) business continues to shine, driven by North America’s growing LPG export capacity and rising electricity demand. Total Energies also ended Q3 with a backlog of $189 million for fabrication sales.

Is the TSX energy stock undervalued?

Total Energies has increased its revenue from $198 million in 2016 to $892.4 million in 2023. Analysts tracking the TSX stock expect the top line to grow to $894 million in 2024 and $993 million in 2025. Moreover, adjusted earnings per share is forecast to expand from $1.01 per share in 2023 to $2.01 per share in 2025. So priced at less than 0.5 times forward sales and 5.9 times forward earnings, Total Energies stock trades at a cheap valuation.

Total Energies pays shareholders an annual dividend of $0.36 per share, translating to a forward yield of 3%. Given its outstanding share count, the company’s annual dividend expense is around $14 million. Comparatively, its free cash flow is forecast to increase to $85 million in 2025, indicating a payout ratio of just 17%. Since May 2022, Total Energies has increased its dividend payout by 50%, and it should continue to raise these payouts over the next two years.

Analysts remain bullish on the TSX dividend stock and expect it to gain more than 50% in the next 12 months.

The Foolish takeaway

Investors seeking exposure to the energy sector could consider gaining exposure to Total Energy Services. In 2025, Total Energy offers a compelling mix of geographic diversification, strong market positioning, and financial discipline while strategically focusing on high-growth LNG opportunities.

Should you invest $1,000 in Total Energy Services Inc. right now?

Before you buy stock in Total Energy Services Inc., consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Total Energy Services Inc. wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Total Energy Services. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Dividend Stocks

3 Canadian REIT Stocks to Buy and Hold for the Next Quarter-Century

These three Canadian REITs trade cheaply and are highly reliable, making them some of the best stocks you can buy…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

1 Practically Perfect Canadian Stock Down 24% to Buy Now and Hold for Life!

CNR stock is a top Canadian stock for investors, especially with shares down on the TSX today.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

The Best Canadian Stocks to Buy Right Away With $30,000

If you have $30,000 you're willing to invest, these are some of the first Canadian stocks to consider on your…

Read more »

rail train
Dividend Stocks

What to Know About Canadian Pacific Railway Stock for 2025

CP stock has now gone through a major merger, so what do investors have to look forward to?

Read more »

ways to boost income
Dividend Stocks

Top Canadian Value Stocks I’d Buy for Dividend Growth and Appreciation

If you are looking for income and capital appreciation, here are three Canadian value stocks for a great total return…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Canadian Stock to Buy With $2,000 Right Now

The company’s powerful combination of growth, income, and value, positions it well to deliver solid returns, making it a smart…

Read more »

Transparent umbrella under heavy rain against water drops splash background. Rainy weather concept.
Dividend Stocks

This 10.6 Percent Dividend Stock Pays Cash Every Single Month

Are you looking to invest for a rainy day? This 10.6% dividend stock pays cash every month, irrespective of the…

Read more »

A worker gives a business presentation.
Dividend Stocks

Market Dip: Opportunity or Risk This April?

This market dip might have investors worried, but should they be excited instead?

Read more »