This Energy Stock Rallies 25%, Clears Entry As Funds Load Up

When institutional investors are loading up on an energy stock it is usually a good sign. And Diversified Energy (DEC) has surged past an entry amid heavy fund accumulation amid the ongoing Iran war.

The Birmingham, Ala.-based firm produces and transports natural gas, natural gas liquids, or NGLs, and oil. Natural gas is used for heating and electricity whereas NGLs, which include ethane, propane and butane, are used for plastics and fuel. Natural gas accounts for around three-quarters of Diversified Energy’s sales.

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The company focuses on snapping up mature wells and optimizing operations. A core part of their strategy is to buy assets from major oil and gas firms that are looking to sell such properties to focus on growthier projects.

The firm has been focusing on expanding its operations away from its traditional hub in the Appalachian basin and into the central region and areas such as Texas, Oklahoma and Louisiana.

Firm Diversifies Through Acquisitions

Diversified Energy was founded in 2001, but recent growth has been lumpy. Revenue came in at $1.9 billion in 2022, tumbled to $795 million by 2024 and then more than doubled to $1.6 billion by 2025.

One reason for its whipsawing performance is it has been on an acquisition spree of late. It is in the process of acquiring East Texas firm Sheridan Production for $245 million, bought Canvas Energy for $550 million in November and spent $1.3 billion to snap up crude and NGL-focused Maverick Natural Resources in May 2025.

Diversified Energy has been strongest on the technical front, and ranks among the top 12% of stocks in terms of price gains over the past 12 months. So far this year it is up 25% while the benchmark S&P 500 has fallen more than 6%.

The energy stock’s fundamental performance is a relative weakness, with its Earnings Per Share Rating sitting at 79 out of 99.

It has performed well in recent quarters, most recently swinging from a loss of $2.49 a share to earnings of $2.81 a share. It also swung from a loss to earnings of $2.13 a share in the prior quarter while earnings popped 486% in the June quarter.

Future earnings projections are also a reason for caution. Full-year earnings are projected to fall 62% this year to $1.74 a share before tumbling a further 24% to $1.32 a share in 2027.

Energy Stock Analysis

Shares are clearing an ideal cup-base buy point of 16.86. However, the pattern’s unsymmetrical appearance is a flaw.

On the other hand, this is an early-stage pattern for the stock. This is a plus as IBD research has found such bases are more likely to net good gains

Diversified Energy stock is currently extended past its 50-day moving line. This important technical benchmark is catching up on its 200-day line.

This means a golden cross, a bullish maneuver where the 50-day line moves above the 200-day, could soon occur. The stock’s relative strength line is also hitting fresh heights, which is encouraging.

Big Money has been loading up on Diversified Energy stock of late. This is reflected in its Accumulation/Distribution Rating of A-. In total, 51% of shares are held by funds.

In addition to its potential for further price gains, the stock also offers a substantial dividend yield of 6.7%. This compares very favorably to the S&P 500 average of 1.1%.

Analysts Rate Diversified Energy

KeyBanc Capital Markets analyst Tim Rezvan has an overweight rating on the stock and a price target of 18. He believes that leasehold sales could fund additional shareholder returns going forward. He noted that “asset sales continue to surprise to the upside,” generating around $160 million in 2025.

“We see the leasehold sales lever as a durable, albeit highly variable, ancillary cash stream that helps drive opportunistic buybacks, and also fund bolt-ons outside the Carlyle JV framework, such as the latest Sheridan acquisition that will be funded with credit facility liquidity,” he said in a March 6 research note.

Citi analyst Paul Diamond rates Diversified Energy stock as a buy with a 17 target. He touted the firm’s “stable operational performance” and growth opportunities.

“Overall, the company is well positioned as the owner of more than 70,000 mature wells with relatively shallow decline rates and a large inventory of undeveloped (and potentially monetizable) acreage and a conservative hedge book,” he said in a March 16 note to clients.

Please follow Michael Larkin on X at @IBD_MLarkin for more analysis of growth stocks.

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