In a sliding market, Genesis Energy has defied the odds, trading up to $17.65 per share. Its 8.9% gain since October 2025 has outpaced the S&P 500’s 2.1% drop. This run-up might have investors contemplating their next move.

Is now the time to buy Genesis Energy, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Do We Think Genesis Energy Will Underperform?

We’re happy investors have made money, but we're cautious about Genesis Energy. Here are three reasons we avoid GEL and a stock we'd rather own.

1. Revenue Spiraling Downwards

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, Genesis Energy’s demand was weak and its revenue declined by 2.2% per year. This was below our standards and signals it’s a low quality business.

2. 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.

Genesis Energy, which averaged 24.7% 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.

3. High Debt Levels Increase Risk

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

Genesis Energy’s $3.05 billion of debt exceeds the $6.44 million of cash on its balance sheet. Furthermore, its 6× net-debt-to-EBITDA ratio (based on its EBITDA of $544.3 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Genesis Energy could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Genesis Energy can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

Final Judgment

We see the value of companies helping consumers, but in the case of Genesis Energy, we’re out. With its shares outperforming the market lately, the stock trades at 8.6× forward EV-to-EBITDA (or $17.65 per share). This valuation tells us a lot of optimism is priced in - we think other companies feature superior fundamentals at the moment. Let us point you toward an all-weather company that owns household favorite Taco Bell.

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