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Solid Renewable Energy Stocks Worth Watching in September

Tirthankar Chakraborty

Renewable energy stocks have underperformed for quite some time. Anxieties about solar panel tariffs in the United States and China’s decision to slow down renewable power development have affected the broader renewable power industry. Meanwhile, several clean energy companies are vying against each other for opportunities, eventually affecting returns. In the process, many of these companies have inserted immense pressure on their balance sheets, dragging share prices down.

But, things are now looking up for renewable energy stocks. The organizers of the 2020 Olympic Summer Games, to be held in Tokyo, are looking to use 100% renewable energy, something that bodes well for the related stocks. The press facilities, international broadcasting center and athletes’ villages will also be powered primarily by solar and wind energy.

In fact, the U.S. Department of Energy expects solar energy to outshine the other renewable sources by 2030, when the country will lean toward solar alone to generate at least 30% of its electricity. And let’s admit that the United States had already sourced 15% of its electricity from solar panels, wind farms and hydroelectric dams last year, a trend that is expected to continue this year.

Thus, investors should keep an eye on well-managed renewable energy businesses this September. First Solar, Inc. FSLR, Enviva Partners, LP EVA, Renewable Energy Group, Inc. REGI and TerraForm Power Inc TERP are good places for a start. Here is why —

Premier Solar Panel Maker

First Solar has quite successfully differentiated itself from competitors. While its peers focus on building low-cost silicon based panels, First Solar invests a lot in manufacturing better and more efficient thin-film solar panels. Such innovative products have boosted its profit margins.

Needless to say, the company’s move to continuously innovate products has set it apart from competitors. Last year, First Solar introduced the Series 6 module by investing nearly $1 billion, which is more efficient than the earlier Series 4 panel. Nonetheless, First Solar’s constant product innovation efforts will continue to attract customers and expand its revenue stream.

The Zacks Consensus Estimate for its next-quarter earnings has risen 19.5% over the past 60 days. The company’s expected earnings growth for the current year is 74.3%, way more than the Solar industry’s projected rally of 21.2%. In fact, shares of First Solar have gained an impressive 47.1% so far this year.

 

Can’t Ignore a Superb Dividend Player

Producer and supplier of utility-grade wood pellets, Enviva Partners, has secured an array of long-term contracts, the average length of which is almost 9.4 years. This has more or less ensured a steady stream of revenues over the next decade. What’s more interesting is that the company now needs to increase production by 53% to meet contract requirements. So, there is plenty of room for growth in the near future.

At the same time, it’s hard to overlook Enviva Partners with an 8.5% dividend yield, compared to the Biofuels industry which hardly pays out any dividend. Needless to say, a dividend player boasts a large customer base, sustainable business model, long track of profitability and strong liquidity.

 

The company’s expected earnings growth for the next year is 160.8%, way more than the industry’s projected rally of 24%. The stock also flaunts a Growth Score of A and has outperformed the industry on a year-to-date basis (+12.5% vs -19.4%).

 

Simple Yet Attractive

Renewable Energy Group basically turns animal fat and vegetable oil into diesel fuel. The company, in fact, can produce 575 million gallons of diesel fuel annually, 70% of which is sold to major fuel marketers.

Simultaneously, demand for biodiesel is continuously increasing and that’s great news for the company. California, Texas, New York and seven other states demanded 1.5 billion gallons of diesel fuel last year, up from 1.15 billion in 2016.

The stock sports a Growth Score of B and has outdone the Biofuels industry over the past three-year period (+41.8% vs +18.4%).

Top Wind & Solar Power Player

TerraForm Power generally focuses on operating wind and solar power assets in Europe and North America. While around 60% of the company’s portfolio consists of wind assets, the rest is solar.

By selling the electricity it generates to end-users under long-term solar power purchase agreements, TerraForm Power has made considerable money. Such agreements have given the company a steady cash flow, most of which it returns to investors in the form of high dividends.

The Zacks Consensus Estimate for its current-year earnings has increased 12% for the past 30 days. The company’s expected earnings growth for the current quarter is 80%, way more than the Utility - Electric Power industry’s projected rally of 9.4%. The company has outperformed the broader industry so far this year (+52.0% vs +18.6%).

All the aforesaid stocks possess a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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TerraForm Power, Inc. (TERP) : Free Stock Analysis Report
 
First Solar, Inc. (FSLR) : Free Stock Analysis Report
 
Enviva Partners, LP (EVA) : Free Stock Analysis Report
 
Renewable Energy Group, Inc. (REGI) : Free Stock Analysis Report
 
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