Best Small-Cap Energy Stocks

Best Small-Cap Energy Stocks

I. Introduction

The energy sector offers some exciting opportunities nowadays for investors seeking high-growth potential stocks. Small-cap energy stocks in particular can provide impressive returns thanks to their room for expansion and lower market correlation. 

However, with higher reward potential also comes higher risk. By identifying the top players in this niche, individual investors can tap into the upside while mitigating some of the volatility inherent in this sector.

In this article, we’ll cover what to look for when evaluating top small-cap energy stocks across financial metrics, growth opportunities, management competence, valuation, and risk factors. Equipped with these insights, you’ll be prepared to invest in the best small-cap energy stock.

II. Key Considerations for Top Small-Cap Energy Stocks

When analyzing small-cap energy stocks, focus on a few key factors to determine the winners offering the best risk-reward balance:

Financial Performance

  • Revenue growth – rapidly expanding top line
  • Profitability – consistent earnings, healthy margins
  • Manageable debt levels – enough access to capital
  • Strong analyst ratings – experts see big potential

Growth Potential

  • Expansion plans – projects and partnerships in pipeline
  • New technologies – investments in innovation
  • Market share opportunities – room to disrupt industry

Management Team

  • Proven track record – experience in energy sector
  • Strategic vision – readiness for industry shifts
  • Shareholder-friendly – incentive alignment


  • Attractive P/E ratio – reasonable price for growth
  • Price-to-book ratio – priced below book value?
  • Undervalued relative to peers – discounts to competitors

Risk Factors

  • Energy price volatility – oil and gas fluctuations
  • Regulatory changes – policy impacts
  • Environmental concerns – emission restrictions


Related: Best oil and gas royalty stocks

III Our Picks for Best Small-Cap Energy Stocks

Small-cap energy stocks

Vital Energy (VTLE)

One small-cap energy stock that offers intriguing upside potential is Vital Energy (VTLE). This Tulsa-based oil and gas explorer has delivered impressive financial growth, yet trades at a discount to industry peers. Here’s a snapshot of what makes VTLE one of the top energy stocks to consider:

  • Robust Revenue Growth
    • 16.3% 3-year per-share revenue expansion
    • Outpaced over 60% of energy industry peers
  • Profitability
    • 48.36% net profit margin
    • Top 92% of competitors
  • Attractive Valuation
    • 0.51X price/revenue multiple
    • Significant discount to 0.97X sector median

In other words, Vital Energy has been firing on all cylinders operationally while maintaining an undervalued market price relative to similar stocks. This disconnect between fundamental performance and valuation signals a potential opportunity.

Some key advantages VTLE brings to the table include:

  • Production expansion in Oklahoma’s STACK region
  • Exploration upside with over 80,000 acres in the area
  • Experienced leadership guiding strategic growth

However, risks to consider include exposure to volatile commodity price swings and execution challenges ramping up output. Still, for investors willing to stomach some turbulence, Vital Energy’s risk-reward profile stacks up as very compelling. This fast-growing small-cap leader could be poised for its own breakout in the months ahead.

Tsakos Energy Navigation (TNP)

TNP operates a fleet of 66 tankers specialized for transporting oil, crude and other petroleum products internationally. Despite the world’s long-term shift towards renewable energy, global demand for fossil fuel transport will likely persist for years to come.

Recently, TNP stock has attracted investor interest thanks to:

  • Strong Share Price Growth
    • +18% year-to-date
    • +59% over past 12 months
  • Small Market Cap
    • Currently $548.51 million
    • Leaves room for further expansion
  • Low Valuation
    • Forward P/E ratio of just 4.91X

However, TNP’s financial performance took a hit during the pandemic:

  • Revenue Declines
    • Negative 3-year revenue growth rate

On balance, Tsakos Energy Navigation represents a compelling speculative opportunity among small-cap energy stocks. Though the business faces macro uncertainty in the years ahead, TNP’s operational expertise and discounted valuation could catalyze enormous upside if conditions improve.

  • Key strengths include:
    • Modern, versatile tanker fleet
    • Strong industry relationships
    • Strategic global access
  • Risks include:
    • Volatile shipping economics
    • Geopolitical uncertainties
    • Future oil demand declines

For investors willing to weather potential volatility, TNP shares have breakout potential as the pandemic recovery picks up steam. This under-the-radar pick deserves a closer look.


VSEC provides supply chain management and consulting services for transportation assets across land, sea and air. It serves both commercial enterprises as well as U.S. defense agencies. With geopolitical tensions escalating worldwide, defense-exposed stocks like VSEC warrant consideration.

Some factors driving VSEC’s appeal:

  • Ideal Market Cap
    • $825+ million
    • Balances size and growth potential
  • Share Growth
    • +15% year-to-date
    • +52% over past year
  • Reasonable Valuation
    • 22.16X trailing P/E ratio
    • Lower than 67% of competitors

However, some caution signs to note include:

  • Middling Financial Strength
    • Balance sheet metrics only average
  • Slowing Revenue
    • 2.8% three-year revenue expansion
    • Barely outpacing peers

In summary, VSE Corp presents an intriguing value play among small-cap defense stocks. While financial results have been mixed recently, upside catalysts exist like:

  • Increasing demand for supply chain expertise
  • Opportunities to expand services internationally
  • Potential for acquisitive growth

For patient investors, VSEC shares could ride strengthening tailwinds in the government contracting space. Though risks remain in play, the risk-reward setup looks compelling at current prices below faster-growing rivals.

ACM Research (ACMR)

ACMR manufactures specialized semiconductor and electronics production equipment, supporting leading chipmakers globally. Despite the current industry slowdown, the long-term outlook for semiconductor demand remains robust.

As a small-cap play on this vital tech sector, ACMR has appealing attributes:

  • Broad Product Portfolio
    • Serves diverse manufacturing processes
    • Drives revenue stability
  • Share Growth
    • +33% year-to-date (recently pulled back)
  • Low Valuation
    • Forward P/E of 12.87X
    • Below 81% of semiconductor peers

However, some factors also raise caution:

  • Potential Value Trap?
    • Per Gurufocus analysis
  • Consumer Weakness Headwinds
    • Belt-tightening impacts chip demand

In summary, ACM Research allows speculative exposure to semiconductor industry growth at a discounted valuation. With critical expertise in high demand, the current softness could offer an opportunity.

Upside drivers include:

  • Innovative proprietary technologies
  • Strategic partnerships with industry leaders
  • Global expansion opportunities

However, execution and concentration risks remain ever-present. For opportunistic investors willing to buy on weakness, ACMR shares offer an intriguing gamble on a rebound.

Rocky Brands (RCKY)

RCKY manufactures and markets footwear under various brands, with products spanning outdoor, work, western, and military boots. Despite rocky market conditions in 2022 that caused RCKY shares to slide 34% over the past year, long-term growth drivers seem intact.

  • Strong historical revenue growth
    • 32% 3-year sales expansion
  • Undervalued
    • 0.3X price/sales ratio
    • Below 79% of industry peers

However, RCKY does show some vulnerability on its balance sheet:

  • Debt-laden
    • Potential liquidity risks

On the charts, RCKY recently found a support level which could signal a bottom is in place.

In summary, Rocky Brands faces macro uncertainty as a consumer discretionary stock, but maintains solid core strengths:

  • Iconic 100-year old American brand
  • Expanding distribution networks
  • Sticky customer loyalty

For risk-tolerant investors, the current discounted valuation could offer an opportunity to buy into the company’s long-term upside at an attractive price. If inflationary pressures subside in 2023, RCKY could be poised for renewed breakout potential.

Zymeworks (ZYME)

ZYME is a clinical-stage biopharma company developing novel cancer therapies called multifunctional biotherapeutics. Although shares have traded sideways in 2022, Wall Street analysts remain bullish on its long-term potential.

Key strengths driving enthusiasm for ZYME include:

  • Innovative Platform
    • Proprietary technology for biotherapeutic engineering
  • Focus on Cancer
    • Huge unmet need for new treatments
  • Analyst Support
    • Consensus “moderate buy” rating
    • 86% upside to $13.84 price target

However, given its early clinical phase, ZYME still faces substantial execution risks in bringing treatments to market.

Going forward, Zymeworks has multiple value-driving catalysts in its pipeline:

  • Phase 1 readouts for lead assets
  • Additional proof-of-concept trial data
  • Partnership announcements to expand reach

In summary, ZYME offers exposure to explosive long-term growth potential as a speculative biotech pick. Once clinical de-risking milestones get achieved, shares could surge higher. For opportunistic biotech investors, the current discounted technical setup offers a compelling entry point relative to future upside possibilities upon commercial validation down the road.


IV. Alternative Investment Options

Beyond picking individual small-cap stocks, investors can gain exposure to the energy sector through a few different vehicles:

  • Energy ETFs – Exchange traded funds hold baskets of stocks across the industry to provide diversified exposure. Benefits include low costs, trading flexibility, and less volatility compared to single stocks. Downsides include less control and lower growth potential.
  • Energy Mutual Funds – Similarly, mutual funds also offer a pooled structure for investing in various energy companies. They provide professional management but have higher fees and limited liquidity relative to ETFs.
  • Options – For more advanced investors, options contracts allow strategic bets on expected share price moves. This can hedge portfolios but requires an appetite for complexity.

Each approach has pros and cons to evaluate against your personal financial situation, risk tolerance, and investment timeframe horizons before deciding.

V. Conclusion

Small-cap energy stocks offer tantalizing growth opportunities mixed with higher volatility. By focusing on stand-out players demonstrating solid financials, expanding market share, visionary leaders and reasonable valuations for their growth, individual investors can tap into the sector’s upside. Just be sure to diversify holdings, watch for emerging risks, and seek professional guidance to balance these strategic investments within your broader portfolio.

The energy sector promises to continue evolving at a rapid pace. I hope this overview gives you a framework for identifying pockets of value within this dynamic arena at the small-cap level.