The Hidden Stock Riding Energy’s Coattails to a 1,640% Gain Still Has Room to Run

The U.S. energy sector keeps humming along as artificial intelligence pushes data-center power demand into overdrive, LNG exports ramp up, and utilities pour billions into grid upgrades. Electrical equipment makers have ridden this wave. Powell Industries (NASDAQ:POWL), the Houston-based supplier of custom-engineered switchgear, motor controls, and power-distribution systems, has gone along for the ride. 

Shares have surged 1,5900% over the past three years — a 1,640% total return — directly due to heavy equipment sales for energy projects. Powell did not invent the boom, but it built the gear that makes it work.

The Energy Tailwind Powering Powell’s Run Higher

Powell’s products manage and protect electrical flow for oil-and-gas facilities, utilities, and industrial sites. When those markets accelerated, so did orders. In fiscal 2025, oil and gas made up 37% of revenue and electric utilities 25%. Revenue growth outpaced industrial-products peers, whose average quarterly sales rose just 1.4% in the most recent period while Powell posted 4.1%.

Let’s look at the numbers side by side (trailing twelve months through Q1 fiscal 2026):

Powell’s 32.2% return on equity and 28.4% gross margin in the latest quarter sit well above industry averages. The stock delivered 151% in calendar 2023 and 151% in 2024. Energy’s coattails were long.

Keeping the Momentum Alive

The story did not end three years ago. Powell’s first-quarter fiscal 2026 results showed revenue of $251.2 million, up 4% from the prior year. Gross profit climbed 20% to $71 million, or 28.4% of sales, while net income rose 19% to $41.4 million, or $3.40 per share.

New orders jumped 63% to $439 million and included a $100-million-plus LNG project on the Gulf Coast plus multiple data-center electrical infrastructure wins. The book-to-bill ratio hit 1.7 times; backlog reached a record $1.6 billion, up 16% year-over-year, with oil and gas and utilities each at roughly 30% and commercial/industrial (now heavy on data centers) at 22%; and cash and short-term investments stood at $501 million with essentially no debt.

That visibility matters. Roughly $933 million of the backlog should convert to revenue over the next 12 months. Free cash flow remains robust, supporting a quarterly dividend raised to $0.27 per share. Powell’s balance sheet gives it room to handle large projects without straining operations.

What’s In Store Next Year and the Next Three Years

Management called fiscal 2026 “off to a strong start” in the February earnings call, citing secular demand in utilities, LNG, and data centers. Analysts project full-year 2026 revenue growth near 10% and EPS around $13.71, with some firms like Sidoti lifting estimates after the backlog surge.

Over the next three years, forecasts point to roughly 10.9% average annual revenue growth and 12.3% earnings growth. Data-center electrification and utility spending should keep the order book full. Granted, large projects carry execution risk and energy markets can swing with commodity prices. 

That said, Powell’s diversification across three major end markets reduces dependence on any single one. Its 0.16% dividend yield remains modest, but the payout ratio sits at just 6.9%, leaving plenty of cash for reinvestment or further increases. Powell has over 30 years of consecutive dividend payments.

Key Takeaway

Powell Industries turned energy-sector demand into a 1,640% three-year return and still carries a $1.6 billion backlog that points to more growth ahead. At a trailing P/E of 45, the stock trades at a premium to some electrical-equipment peers, but the numbers — record orders, expanding margins, and cash-rich balance sheet — justify the valuation for investors who believe America’s power needs will keep rising. 

Smart investors will keep an eye on Powell’s backlog conversion, but treat any pullback as a potential entry point. The coattails are still firmly attached.