Although several sectors got hammered pretty badly last year, certain areas did exceptionally well. Renewable energy stocks, for instance, had an amazing year despite the novel coronavirus pandemic.
In fact, the pandemic has acted as a tailwind for renewable energy stocks. Governments the world over are placing a premium on renewable energy. That’s primarily the reason you see EV stocks do so well.
However, many investors may be skeptical that this is a false dawn. Renewable energy stocks are still considered a chic area of investing. One that does not necessarily give the impression of stability and long-term growth.
But don’t let those thoughts deter you from investing in this space. There are some great names in this industry that are doing fantastically well and will continue to do so for the foreseeable future.
Let’s look at five such names.
- First Solar (NASDAQ:FSLR)
- Brookfield Renewable Partners (NYSE:BEP)
- NextEra Energy Partners (NYSE:NEP)
- Ameresco (NYSE:AMRC)
- Canadian Solar (NASDAQ:CSIQ)
Renewable Energy Stocks: First Solar (FSLR)
Solar power is all the rage these days. Coal power plants are closing rapidly as solar energy is becoming cheaper with each passing day. It’s no surprise why First Solar is up 18.3% in the last three months alone.
The American solar panel manufacturer builds PV solar modules with thin-film semiconductor technology. It claims to meet solar needs at every stage of the product lifestyle. Everything from financing to end-of-life panel recycling.
The main reason why I am excited about this one is its recent performance. In the past three quarters, the company beat analyst expectations every time. We don’t have the fourth-quarter numbers, but we can be bullish, considering our data.
In Q3, the solar panel manufacturer exceeded expectations. EPS came in at $1.45 per share, beating analyst estimates of 61 cents per share, a 137.7% beat per Refinitiv. The $1.45 per share earned on $928 million in revenue also handily beat the year-ago figures of 29 cents per share, on $546.8 million in revenue.
If you survey the analyst sentiment, then it’s a bit bearish at this point. Out of 18 analysts covering the stock, only five have a bullish rating. According to data gathered by Refinitiv, the consensus 12-month price target stands at $88.90 per share, a 10% downside from the current price.
I am not surprised. FSLR stock has a one-year return of 86.8%. Understandably, analysts want it to cool down. But the fact remains, it’s an excellent pick in the solar space.
Brookfield Renewable Partners (BEP)
Let’s move to a diversified conglomerate from more of a pureplay. Brookfield Renewable Partners is a subsidiary of financial juggernaut Brookfield Asset Management (NYSE:BAM), which owns a 60% stake in the company.
BEP has a roughly 20,000 megawatt portfolio and more than 5,300 generating facilities in North America, South America, Europe, and Asia. It also has a 23-gigawatt development pipeline in place.
The company derives the bulk of its revenue from hydro and wind energy. However, it’s planning for most of its revenues to come from solar in the future. As part of that initiative, it recently paid $810 million to purchase Exelon’s solar business.
The one negative that I will highlight is valuation. BEP stock trades at a high 103.8 times forward price-to-earnings. Granted, I understand that a big institutional name comes with stability, and you have to pay the price for it. Nonetheless, paying triple digits does seem awfully high. I like the stock, but I would wait for a better entry point.
Renewable Energy Stocks: NextEra Energy Partners (NEP)
Another name with significant institutional support, NextEra Energy Partners, is structured as a limited partnership. In essence its a subsidiary of NextEra Energy (NYSE:NEE).
The company operates a plethora of clean energy projects in solar, wind, and natural gas. Renewable energy produces the most revenue for the company.
Much like the other stocks on this list, NEP is on absolute fire at the moment, outperforming the S&P 500 by 25.6% and its sector by 51.6% in the past year. Meanwhile, its sector underperformed the market by 25.9% during the past year.
That’s what happens if you perform well in a challenging market. In the last 12 quarters, the company has exceeded analyst expectations a total of seven times. While that is impressive on its own, the bigger deal is the positive earnings surprises in the last three quarters on the trot.
The company reported EPS of $0.85 last earnings season. Consensus estimates compiled by Refinitiv averaged $0.301 per share, translating to a beat of 182.4%.
Out of 19 analysts covering the stock, 13 have either a “strong buy” or “buy” rating on NEP stock.
Ameresco is a green energy solutions provider that offers its services to public and private companies.
It recently inked a $173-million energy savings performance contract to upgrade the Norfolk Naval Shipyard in Virginia. According to the company, the new system will decrease electricity imported from the grid by 68%. These kinds of large-scale contracts are why I like Ameresco over some of the energy stocks out there.
However, there is a flip side to the argument. You have to understand that when you invest in this one, you buy into a company that does a lot of its work with the public sector. Hence, it can get stuck in the bureaucratic quagmire.
Other than this, the company is a rock-solid performer. In the last 12 quarters, Ameresco has reported 11 positive earnings surprises.
Looking ahead, analysts expect revenues to increase by 13.5% and 24.5% in fiscal 2020 and 2021, respectively. Out of seven analysts covering AMRC stock, six have either a “strong buy” or “buy” rating on it.
Canadian Solar (CSIQ)
One of the most vertically integrated solar companies globally, Canadian Solar is a great performer with a global presence. That’s one of the main reasons it has done so well in the past year.
In the last 12 quarters, CSIQ reported positive earnings surprises eleven times. For the last six quarters, the company has a perfect record, with the third quarter EPS of $0.150 per share beating estimates by 412.5%. Due to its business model, the company can reduce costs and improve margins.
With solar positioned to become one of the preeminent sources of power in the future, Canadian Solar is in a prime position to benefit. Geographic diversification and a vertically integrated structure will ensure the Candian energy company grows at a brisk pace.
Unlike some of the other members of this list, CSIQ is trading at reasonable multiples. Shares are at 36.7 times forward P/E despite rising 51.1% in the last three months.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.