The world has been preparing for a green revolution for years now. Unfortunately, though, many green energy stocks haven’t lived up to investor expectations so far, despite the continued adoption of various renewable energy sources. However, with growing consumer awareness, cheaper clean energy and global policy changes, the next few decades will be a turning point for the industry.
Furthermore, green energy stocks currently have friends in all the right places. For instance, President Joe Biden recently laid out his $2 trillion climate-focused infrastructure plan to bolster clean-energy efforts. Moreover, the European Union (EU) plans to achieve a “32% share for renewable energy” by 2030. Therefore, a wealth of mettle-proving opportunities have been opened up for new alternative energy companies as well as existing ones.
Apart from world governments, even major banks such as JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C) have pledged to spend billions of dollars in combatting climate change over the next few years. Moreover, in the past three years, assets in investment funds focused partially on the environment have delivered hefty returns to stockholders. Hence, green energy stocks have sizeable growth runway. The list below represents the cream of the crop.
- Sunrun (NASDAQ:RUN)
- Enphase Energy (NASDAQ:ENPH)
- TPI Composites (NASDAQ:TPIC)
- Sunpower (NASDAQ:SPWR)
- Daqo New Energy (NYSE:DQ)
- Renewable Energy Group (NASDAQ:REGI)
- Brookfield Renewable Partners (NYSE:BEP)
Green Energy Stocks to Buy: Sunrun (RUN)
First up on this list of green energy stocks, Sunrun is one of the leading residential solar power companies operating in the United States. Currently, this name has a customer base of over 500,000. The incoming shift to solar power should only add to that figure.
Although it isn’t profitable yet, Sunrun has also aggressively grown its revenue base. For the first quarter of 2021, the company saw revenue increase 59% year-over-year (YOY) to $334.8 million. In addition, multiple tailwinds — including growing consumer interest in reducing carbon emissions, the reduced cost of solar panels and government support — could help RUN achieve profitability within the next few years.
True, RUN stock has had it tough in the past few months, as investors have dumped renewable energy stocks in favor of reopening plays. As a result, the stock is down 36% year-to-date (YTD) and about 7% in the past three months. But this dip presents an excellent opportunity to invest in a clear leader in the solar energy industry — one that’s poised for hyper growth.
Enphase Energy (ENPH)
Enphase Energy designs, develops, manufactures and sells micro inverter-based solar-plus-storage systems — in fact, according to the company, it’s “the world’s leading supplier.” Moreover, Enphase’s intelligent platform facilitates energy management and delivers user-friendly solutions.
Altogether, ENPH is arguably the strongest company in its sector from a fundamentals perspective. For one, it operates at higher margins and achieves more revenue growth than the competition. Plus, with several exciting projects in the pipeline, ENPH stock should continue to expand its addressable market in the future.
This company has had a stellar earnings track record, boasting double-digit revenue growth in the past several quarters. In its latest quarter, for instance, revenues shot up roughly 47% on a YOY basis. Forward revenue estimates also look healthy, with analysts expecting revenue to come to $1.32 billion for 2021. Additionally, Enphase has been a cash-flow machine, with a current trailing twelve-month cash balance of $1.49 billion.
So, with multiple products in its pipeline and new markets to tap into, this is definitely one of the green energy stocks with massive growth runway ahead.
Green Energy Stocks to Buy: TPI Composites (TPIC)
TPI Composites is a leading Arizona-based manufacturer of wind blades for original equipment manufacturers (OEMs). This company has an excellent business model with robust financials, which will only get better with the strong upward trajectory of wind energy.
Currently, TPIC stock has performed remarkably well in the past year, with its 12-month returns at a whopping 106%. On top of that, results have been solid for the company of late. In Q1 2021, TPI Composite’s net sales of $404.7 million rose by 13.5% on a YOY basis. Plus, utilization was at 77% in comparison to 70% in the same period last year.
As a result, TPIC currently expects net sales of $1.75 billion to $1.85 billion for 2021, slightly ahead of the consensus $1.8 billion in sales this year. Additionally, the company has backlogs worth potentially $4.6 billion through 2024, with minimum commitments of $2.8 billion. Hence, TPI stock has a bright future ahead as one of the green energy stocks, with a sustained upsurge in demand for electric vehicles (EVs) and renewable energy.
Next up on this list of green energy stocks, Sunpower is currently one of the largest American solar energy companies — in fact, back in September, Investopedia ranked it as the fifth largest in the country.
The past couple of years have effectively streamlined SPWR’s business model, expanding its margins considerably. For Q1 2021, Sunpower saw YOY growth of nearly 16% for revenue excluding “legacy business.” Despite the pandemic-led slowdown, the company also posted a profit in 2020, continuing the trend from the previous year. Moreover, SPWR stock has rewarded its stockholders magnificently, boasting a 12-month return of 330%.
Of course, there are some downsides here. For one, a shortage of raw materials will likely negatively impact the company’s business. Sunpower is seriously affected by the prices of materials such as polysilicon, copper and solar glass. Therefore, it needs to continue working on reducing costs and streamlining operations to expand its margins.
That said, with the Biden Administration aiming to target full decarbonization by 2035, the demand for solar energy should rise rapidly in the coming years. Hence, this company is still in a great position to push on to higher highs.
Green Energy Stocks to Buy: Daqo New Energy (DQ)
Daqo New Energy is a Chinese enterprise that manufactures silicon materials for solar photovoltaic systems. Like other green energy stocks in this list, this company has performed relatively well over the past quarters.
Recently, Daqo’s Q1 revenue came in at $256.1 million (Page 9), an increase of 52% YOY from the year-ago period. Additionally, analysts expect revenue of $1.42 billion for the year. Perhaps most importantly, though, Daqo appears to have very healthy margins.
Currently, management also appears to have strong insight into the Chinese solar market. It predicts that “demand should average above 70GW annually with the potential to even exceed 100GW.” Short-term factors could pressure DQ stock, but fundamentals and valuation are on its side. The economics of solar as well as the secular shift away from the fossil-fuel industry should continue to drive global installation growth higher in the next few years.
Renewable Energy Group (REGI)
Renewable Energy Group is a global producer of biofuels and renewable fuels. Headquartered in Iowa, the company was started in 1996 and currently operates 12 biorefineries in the states as well as a couple of locations in Europe.
When it comes to the big picture, the biofuel industry offers a bridge between fossil fuels and electric renewables. This could prove especially useful as the world transitions into more sustainable energy sources. Moreover, this company’s research and development (and its years of experience) are now bearing fruit; REGI has seen positive revenue growth in the past few quarters. Hence, REGI stock is one of the green energy stocks that could really blow up this year.
True, REGI’s fundamentals have been weak — but it has also shown signs of growth. For example, the company saw a 14% increase in revenues on a YOY basis in its most recent quarter. Renewable diesel and downstream margin expansion are two key pillars of growth for the company. Moreover, its strong product lines — including its premium fuels and feedstock flexibility — have led to a robust positioning in the market.
Green Energy Stocks to Buy: Brookfield Renewable Partners (BEP)
Last up on this list of green energy stocks, Brookfield Renewable Partners is “one of the world’s largest investors in renewable power, with approximately 21,000 megawatts [MW] of generating capacity [and] assets […] located in North and South America, Europe, India and China.” Additionally, these assets “comprise a diverse technology base of hydro, wind, utility-scale solar, distributed generation, storage and other renewable technologies.”
Since its inception, Brookfield has amassed an incredible $59 billion in assets under management. As noted above, it also has some 21,000 MW of capacity linked to more than 5,900 facilities. Moreover, BEP stock has generated a healthy 21% return in the past month and is poised for even stronger gains this year.
Overall, this company has a strong record of generating positive free cash flows. Its funds from operations (FFO) were at $1.52 per unit in the past year, nearly 23% higher than in 2019. Additionally, its leveraged FCF margin is currently at a spectacular 23.5%.
In terms of the dividend, BEP stock also yields a substantial 3.02% according to Seeking Alpha, which is higher than many of its peers. Thus, as we advance into the green revolution, this name is positioned to benefit greatly from the renewable energy trend.
On the date of publication, Muslim Farooque 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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.