The past six months have been a windfall for ProPetro’s shareholders. The company’s stock price has jumped 163%, hitting $13.83 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now the time to buy ProPetro, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think ProPetro Will Underperform?

Despite the momentum, we're sitting this one out for now. Here are three reasons you should be careful with PUMP and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Cyclical sectors like Energy often flatter weaker operators during favorable price environments, but a longer-term lens separates those from businesses that can consistently perform across market cycles. Over the last five years, ProPetro grew its sales at a mediocre 10% compounded annual growth rate. This was below our standard for the energy upstream and integrated energy sector.

2. 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.

ProPetro’s $1.27 billion of revenue in the last year is pretty small for the industry, suggesting the company is subscale business in an industry where scale matters.

3. 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.

ProPetro, which averaged 27.5% gross margin over the last five years, exhibiting 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

ProPetro falls short of our quality standards. After the recent rally, the stock trades at 2,131.7× forward P/E (or $13.83 per share). This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere. We’d suggest looking at one of Charlie Munger’s all-time favorite businesses.

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