The bullish case for renewable energy stocks to buy centers on a math problem: what happens if we run out of critical raw materials? To be fair, many people have fear mongered about this topic and I’m not about to contribute to the cause. Still, the core principle still applies. We, humans, need to be good stewards of natural resources.
Further, the issue of climate change has become a serious concern over the past several years. Respectfully, the matter carries significant debate. Still, the broader scientific consensus indicates considerable damage to the environment. While renewables represent one segment of a wider protocol, the push for solutions certainly helps renewable energy stocks to buy.
Finally, unlike some other sectors, hardly any cynicism exists in this space. When you target renewable energy stocks to buy, you can feel good doing so. Below are seven compelling ideas to consider.
|CLNE||Clean Energy Fuels||$5.69|
|NRP||Natural Resource Partners||$56.00|
NextEra Energy (NEE)
One of the biggest names among renewable energy stocks to buy, NextEra Energy (NYSE:NEE) is the largest electric utility holding company by market capitalization, per its public profile. Further, its website states that NextEra ranks among the largest capital investors in infrastructure in the U.S. Despite significant relevancies, NEE slipped nearly 10% since the January opener. However, this could open doors for contrarian investors.
According to Gurufocus.com’s proprietary calculations for fair market value (FMV), NextEra rates as a modestly undervalued investment. Objectively, though, the company’s biggest strength centers on its profitability metrics. In particular, its net margin stands at 19.79%, ranked better than 85% of the competition. Plus, its return on equity pings at 11.07%, better than 65% of its peers.
Also, its three-year dividend growth rate is 10.8%. In contrast, the sector median is only 5%. Turning to Wall Street, analysts peg NEE as a consensus strong buy. Moreover, their average price target hit $95.73, implying over 26% upside potential.
Brookfield Renewable Partners (BEP)
A publicly traded limited partnership, Brookfield Renewable Partners (NYSE:BEP) owns and operates renewable power assets. Carrying an attractive asset portfolio, Brookfield ranks among the more enticing renewable energy stocks to buy. Per its public profile, as of the end of 2017, it owned over 200 hydroelectric plants, 100 wind farms, over 550 solar facilities, and four storage facilities, with approximately 16,400 megawatts (MW) of installed capacity.
Unlike NextEra above, Brookfield got off to a solid start in the new year, popping up nearly 7%. However, in the trailing year, shares dipped more than 19%. Still, this might present an opportunity for contrarian investors. Currently, the market prices BEP at 1.68 times (trailing) sales. As a discount to growth, Brookfield ranks better than 61.68% of the competition.
Also worth noting is that BEP trades hands at 5.59 times operating cash flow. For comparison, the sector median is 8.81 times. Plus, Wall Street analysts appreciate BEP, pegging it a consensus moderate buy. Their average price target stands at $35.97, implying an upside potential of 30%.
Enphase Energy (ENPH)
Headquartered in Fremont, California, Enphase Energy (NASDAQ:ENPH) specializes in energy technology. Specifically, Enphase focuses on the development and manufacturing of solar micro-inverters, battery energy storage, and electric vehicle charging stations primarily for residential customers. In the trailing year, ENPH gained nearly 37% of its equity value, making it one of the top performers among renewable energy stocks to buy.
However, in the new year, circumstances have been less than auspicious for Enphase. Since the Jan. opener, ENPH dropped 20% in the charts. Nevertheless, contrarians might take that as their cure to buy in. For instance, Gurufocus.com’s proprietary FMV calculations peg Enphase as significantly undervalued.
Objectively, the company enjoys a bonkers growth rate of 50.4% during the past three years. As well, its net margin stands at a very healthy 17%. Further, its Altman Z-Score pings at 9.79, indicating very low bankruptcy risk. Presently, covering analysts assess ENPH as a consensus moderate buy. Further, their average price target of $301.50 implies a nearly 49% upside potential. Therefore, it’s a strong name to keep on your radar for renewable energy stocks to buy.
Clearway Energy (CWEN)
While Clearway Energy (NYSE:CWEN) might not get as much attention as the top-tier players among renewable energy stocks to buy, it more than holds its own as an industry competitor. According to its website, Clearway is one of the largest renewable energy owners in the US with over 5,500 net MW of installed wind and solar generation projects.
As a chart performer, CWEN has been providing choppy but generally positive growth. In the trailing year, shares gained a bit more than 2%. Further, for patient investors, CWEN may have more room to run. Notably, the market prices CWEN at a trailing multiple of 6.83. As a discount to earnings, Clearway outpaces nearly 81% of the industry.
Also, CWEN trades at 5.61 times free cash flow (FCF). In contrast, the sector median pings at a lofty 10.76 times. Thus, it offers a discounted play among renewable energy stocks to buy. Turning to Wall Street, analysts peg CWEN as a consensus moderate buy. Further, their average price target stands at $37.50, implying 14% upside potential.
Clean Energy Fuels (CLNE)
Headquartered in Newport Beach, California, Clean Energy Fuels (NASDAQ:CLNE) focuses on renewable natural gas (RNG). According to the U.S. Department of Energy, “…RNG can be used as a transportation fuel in the form of compressed natural gas (CNG) or liquefied natural gas (LNG). RNG qualifies as an advanced biofuel under the Renewable Fuel Standard.” Because of the underlying asset’s strong implications, Clean Energy Fuels ranks among the renewable energy stocks to buy.
However, from a financial perspective, CLNE presents incredible risks so prospective investors must conduct due diligence. First, Gurufocus.com warns its readers that Clean Energy Fuels may be a value trap. As well, it appears overvalued. For instance, CLEN trades at 3.3 times (trailing) sales, ranking worse than over 80% of the competition.
That said, not everything about Clean Energy is terrible. On its balance sheet, the company carries a cash-to-debt ratio of 1.74 times, outpacing nearly 65% of the industry. Also, its equity-to-asset ratio is 0.77 times, above nearly 82% of its peers.
Perhaps most compelling of all, UBS initiated coverage on CLNE two months ago with a $12 price target. This forecast implies a whopping 105.48% upside potential. Thus, it’s an enticing trade among renewable energy stocks to buy.
Natural Resource Partners (NRP)
To be clear, Natural Resource Partners (NYSE:NRP) is a diversified natural resource company that owns, manages, and leases a diversified portfolio of properties. Specifically, we’re talking about soda ash, which represents a key raw material in the processing of lithium. Also, the company owns the right to conduct carbon sequestration and renewable energy activities.
On the financial front, Natural Resource requires considerable patience. Per Gurufocus.com, the company may represent a possible value trap. It’s not entirely unjustified in this assessment. However, more recent data suggests that NRP just needs some extra time. For instance, in its third quarter of 2022, NRP posted revenue of $87.3 million, up over 74% against the year-ago quarter.
Also, the company’s trailing-12-month revenue stands at $320.4 million. That would represent a multi-year high going back to the end of 2015. As well, it enjoys outstanding profitability metrics. Its return on assets stands at over 28%, reflecting an extremely high-quality business. Therefore, for the careful contrarian, NRP could be an interesting candidate for renewable energy stocks to buy.
Hallador Energy (HNRG)
Billing itself as a leader in the broader energy ecosystem, Hallador Energy (NASDAQ:HNRG) beats around the bush regarding what it does, which is frustrating I must say. However, drilling into the details, it specializes in generating power and its means of doing so is through coal. However, the company also owns a subsidiary unit called Hallador Renewables, which focuses on solar energy infrastructures.
To be completely transparent, HNRG represents one of the riskiest names among renewable energy stocks to buy. Presently, Gurufocus.com warns that based on its proprietary FMV calculations, Hallador’s significantly overvalued. Also, against most other metrics, the discount just doesn’t exist.
However, it’s not a completely hopeless investment on paper. For example, the market prices HNRG at 1.48 times its tangible book value. In contrast, the sector median is 1.74 times. Finally, only one analyst from B. Riley Financial covers HNRG with a lackluster “hold” view. However, the expert’s $9 price target implies over 9% upside potential. That’s not too bad considering HNRG already skyrocketed almost 154% in the trailing year.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.