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The growing climate crisis has been brought up time and again over the last few years. Wildfires, heatwaves, droughts and floods are increasingly disrupting and destroying the lives of many around the world. This in turn has led conscience-minded investors to seek out more sustainable and environmentally aware companies when looking for investing opportunities. According to Global Sustainable Investment Alliance, ESG (environmental social governance) funds now have assets worth over $30 trillion under management across the globe.
“We’re not saying to not to invest in an oil or gas company. But if you are, you want to invest in one that has a historically strong track record in dealing with environmental issues,” said Nuveen’s Managing Director Steve Libertadore.
With this in mind, we used TipRanks’ Stock Screener tool to seek out two companies with an environmentally friendly agenda. In addition to a sustainable approach, both, as it turns out, currently have a Strong Buy consensus rating from the Street. Let’s get started.
Renewable Energy Group Inc. (REGI)
With a name like Renewable Energy Group, it would be hard for this company to express more succinctly what its primary focus is. REGI is the largest biodiesel manufacturer in the US, with 14 biorefineries and a feedstock processing facility. Although the company only exhibited modest gains of 11% in 2019, it has been very successful over the last three years. The company has added over 200% to its share price since 2017, its forward-thinking agenda and profitable operations rewarded handsomely by the market.
In what the company regards as a big win for the environment, agriculture and US motorists, Congress passed legislation which included a retroactive reinstatement and extension of the $1 per gallon Biodiesel Tax Credit (BTC) in December. The credit will be retroactively reinstated to January 1, 2018 and extended up until December 31, 2022. This means REGI will receive $500 million this year for production spanning back to the beginning of 2018, with it also standing to earn a further $1 billion in subsidies by the end of 2022. CEO Cynthia Warner has said the company will use the additional funds for its expansion strategy and share repurchases, which should add value to shareholders.
The good news has excited Roth Capital analyst Craig Irwin, who said, "We are adding the benefit from reinstatement of the $1/gal BTC to our forecasts (but we are waiting to adjust retroactive results until these are disclosed), factoring continued headwinds from feedstock commodity competition. We expect around $150m of BTC cash will be used for share buybacks, with $150 million for strategic RHD expansion projects, and the remainder for balance sheet remediation.”
Irwin, therefore, kept his Buy rating on Renewable Energy Group and bumped up his price target, from $22 to $33. The new target implies upside potential of 26%. (To watch Irwin’s track record, click here)
The Street is siding with the bulls, too. REGI’s Strong Buy consensus rating breaks down into solely Buy ratings – 4, as it happens. At $35, the average price target suggests possible upside of 33%. (See Renewable Energy Group stock analysis on TipRanks)
Sunrun Inc. (RUN)
It is always refreshing to find companies whose use of cutting-edge technology is directed towards improving the world around us. For solar panel provider Sunrun, the strategy has rewarded investors handsomely so far.
Like REGI, Sunrun has done very well over the last few years, with 2019’s 38% gain adding up to a cumulative 200% increase since 2017.
The company is now the number 1 residential solar installer in the US. Its 3Q19 earnings report boasted year-over-year customer base growth of 24%, with 271,000 homes now having a Sunrun panel. Following several years of underwhelming results, a US Solar Market Insight Report noted that in 2019’s third quarter, the residential solar industry installed a record high 712 megawatts (MW) of electrical generating capacity. A combination of policy changes and affordability are pushing installers into states such as Florida and Texas, where none had operated before.
In a recent research note, J.P. Morgan’s Mark Strouse notes Sunrun is well positioned within the "high-growth" US residential rooftop solar market. The analyst thinks the company is undervalued and will attract investors looking for exposure to the de-carbonization, decentralization and digitization of energy. Furthermore, Strouse says Sunrun’s leading scale could present adjacent opportunities for growth.
Unsurprisingly, then, the 4-star analyst initiated coverage of Sunrun with an Overweight rating. The accompanying $19 price target represents potential upside of 12%. (To watch Strouse’s track record, click here)
With 5 Buy ratings, Sunrun has a unanimous Strong Buy consensus rating from the Street. Gains in the shape of 26% could be lining investors’ pockets should the average price target of $21.40 be attained over the next year. (See Sunrun stock analysis on TipRanks)
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