Over the past six months, Helix Energy Solutions has been a great trade, beating the S&P 500 by 28.7%. Its stock price has climbed to $9.67, representing a healthy 35.6% increase. This performance may have investors wondering how to approach the situation.
Is now the time to buy Helix Energy Solutions, 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 Helix Energy Solutions Not Exciting?
We’re happy investors have made money, but we’re sitting this one out for now. Here are two reasons why HLX doesn’t excite us, plus one stock we’d rather own.
1. Fewer Distribution Channels Limit Its Ceiling
In Energy, scale separates fragile single-asset producers from platform-style businesses that generate revenue across entire basins and infrastructure networks.
Helix Energy Solutions’s $1.30 billion of revenue in the last year is pretty small for the industry, suggesting the company is a subscale business in an industry where scale matters.
2. Low Gross Margin Reveals Weak Structural Profitability
While energy gross margins can be distorted by commodity prices, hedging, and short-term cost swings, sustained margins across a full cycle reflect a producer’s underlying asset quality, infrastructure position, and cost structure.
Helix Energy Solutions, which averaged 11.4% 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
Helix Energy Solutions isn’t a terrible business, but it doesn’t pass our quality test. With its shares outperforming the market lately, the stock trades at $9.67 per share (or a forward price-to-sales ratio of 1.1×). The market typically values companies like Helix Energy Solutions based on their anticipated profits for the next 12 months, but there aren’t enough published estimates to arrive at a reliable number. You should avoid this stock for now - better opportunities lie elsewhere. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
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