4 energy-sector stocks with P/E above 25

The energy sector has traditionally been a low-valuation area. For years, oil giants traded at single-digit earnings multiples, and investors got so used to cheap energy stocks that a P/E above 25 in this industry looks like a typo. This year, however, it’s not a typo. A combination of weak 2025 earnings and a sharp rally in share prices after this year’s oil shock has created a situation where several well-known energy names are trading at valuations you’d expect from tech companies. What’s behind this, and is it a cause for concern?

When investors screen for stocks with a P/E ratio (price-to-earnings ratio) above 25, they usually end up in technology, software or healthcare. The energy sector traditionally sits at the opposite end of the spectrum. The oil and gas industry’s median P/E has long hovered around 15, and during periods of bumper profits it can even dip into single digits. This year, however, things are different. Four well-known energy companies are currently trading at a trailing (last 12 months) P/E around 25 or well above it.

This isn’t because oil giants have suddenly turned into growth companies. 2025 was a weak year for sector earnings: oil prices were subdued for much of the year, refining margins were under pressure, and some firms also booked large one-off write-offs. As a result, earnings over the past twelve months have been depressed.

This year’s escalation of the Middle East conflict and disruption to shipping through the Strait of Hormuz briefly sent Brent crude above $125 a barrel, dragging producers’ share prices with it. A high share price divided by low trailing earnings produces a mechanically sky-high P/E.

That’s exactly why, in energy this year, it’s more important than ever to distinguish between trailing and forward multiples. While the trailing P/E looks in the rear-view mirror at a weak 2025, forward multiples – which factor in expected earnings at current oil prices – are in single digits for some of these companies. Let’s look at the individual stories in more detail.

Why P/E behaves differently in energy

Before we dive into the individual names, it’s worth recalling one peculiarity of cyclical industries. For oil companies, the P/E ratio often behaves in exactly the opposite way a layperson would expect. It tends to be lowest at the top of the cycle, when earnings are at record highs and the market correctly senses they won’t last. Conversely, it’s highest at or just after the cycle trough, when earnings are squeezed to a minimum but the stock price is already beginning to price in a recovery. So, a low P/E at a producer can paradoxically signal peak profitability and an expensive purchase, while a high P/E can mean the exact opposite.

In the pandemic year of 2020, oil companies plunged deep into losses and their P/E ceased to make sense at all, because the denominator was negative or near zero. Two years later, when Brent crude was trading above $120 a barrel following Russia’s invasion of Ukraine, the same stocks were changing hands at single-digit earnings multiples. Chevron, for example, was trading at a P/E of around 8 in the third quarter of 2022 – a fraction of today’s multiple – even though its business was in many respects in weaker shape than it is today.

That’s precisely why professional investors in energy supplement P/E with metrics that are less distorted by the cycle. The most common are EV/EBITDA (enterprise value to operating profit), price-to-operating cash flow, or free-cash-flow yield – i.e., the percentage of market cap the company generates in cash each year after investments. These metrics work with cash flows, which are less affected by one-off write-offs and accounting revaluations of derivatives than net income. For today’s quartet, valuations look noticeably cheaper on cash-flow metrics than on P/E alone, though even on that basis, this isn’t a clearly undervalued segment of the market.