Although Baker Hughes (currently trading at $64.05 per share) has gained 5.2% over the last six months, it has trailed the S&P 500’s 11.7% return during that period. This might have investors contemplating their next move.
Is there a buying opportunity in Baker Hughes, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Baker Hughes Not Exciting?
We don’t have much confidence in Baker Hughes. Here are two reasons you should be careful with BKR, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance can give signals about its business quality. Even a bad business, especially in a cyclical industry, can shine for a year or so, but a top-tier one should exhibit resilience through cycles. Over the last five years, Baker Hughes grew its sales at a sluggish 6.3% compounded annual growth rate. This was below our standard for the energy upstream and integrated energy sector.
2. Low Gross Margin Reveals Weak Structural Profitability
In a single quarter or year, gross margins in the sector can swing wildly due to commodity prices, hedging, or changes in labor costs. Over a multi-year period across different points in the cycle, gross margin differences can signal whether a company is a structurally-advantaged producer (“rock” quality, takeaway, operating costs) or not.
Baker Hughes, which averaged 22.3% 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
Baker Hughes isn’t a terrible business, but it doesn’t pass our quality test. With its shares lagging the market recently, the stock trades at 23.5× forward P/E (or $64.05 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We’re fairly confident there are better stocks to buy right now. We’d suggest looking at one of our top software and edge computing picks.
Stocks We Like More Than Baker Hughes
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.