Fundamentally, it’s quite possible that the discussion centering on clean energy stocks to buy represents an ignorable topic. At its core, the underlying energy initiative concentrates on the growing concerns regarding climate change. We already see the economic consequences of climate dynamics such as rolling blackouts. To prevent greater catastrophes, though, a serious transition must take place.
Another paradigm that rattled investors into seeking clean energy stocks to buy targets geopolitical challenges. While Russia’s invasion of Ukraine and its blackmailing of hydrocarbon outflows dominates headlines, the greater lesson is this: western countries and their allies cannot depend on politically unstable administrations for their core energy needs.
To be fair, even the best clean energy stocks to buy feature a mix of financial opportunities and challenges. Nevertheless, over the long run, broader fundamentals may open doors to significant upside. With that in mind, here are compelling market ideas to consider.
NextEra Energy (NEE)
Based in Juno Beach, Florida, NextEra Energy (NYSE:NEE) is the largest electric utility holding company by market capitalization. At the moment, its market value stands at $152.37 billion. On a year-to-date basis, NEE held up relatively well, a strange thing to say about a loss of nearly 16%. However, the benchmark S&P 500 shed nearly 22% during the same period.
On a technical level, NEE shares have been trading flat since the end of 2020. It’s possible that traders could be setting up a baseline before swinging dramatically higher in 2023. Adding to this speculation, Reuters reported that NextEra “whizzed past estimates for quarterly revenue on Friday on strong demand amid surging power prices, while predicting a boost from the recent anti-inflation act.”
Based on proprietary calculations, Gurufocus.com reckons that NEE represents a modestly undervalued business. Against traditional metrics, investors should note the company’s net margin of 19.3%. In sharp contrast, the industry median is only 8.1%, meaning that NEE ranks above nearly 84% of its peers. Therefore, NEE is one of the top clean energy stocks to buy.
Enphase Energy (ENPH)
Headquartered in Fremont, California, Enphase Energy (NASDAQ:ENPH) is an American energy technology company. It develops and manufactures solar micro-inverters, battery energy storage, and electric vehicle charging stations primarily for residential customers. At the time of writing, ENPH features a gain of 57% YTD. Its market cap stands at over $40.76 billion.
Fundamentally, Enphase benefits cynically from rolling blackouts that plagued states like California throughout the new normal. With (wealthier) households recognizing their own vulnerabilities to the power grid, Enphase should enjoy expanded demand. To be fair, investors will be paying more than 53-times forward earnings for the privilege. Still, dynamics such as climate change may force consumers’ hands.
Not surprisingly, Enphase delivers the goods in terms of growth. Its three-year revenue growth rate stands at 45%, beating out more than 98% of its peers. As well, the company enjoys a strong profitability record, leading to a return on equity of 60%. This signifies an extremely high-quality business, making ENPH one of the best clean energy stocks to buy.
Brookfield Renewable (BEP)
Based in Bermuda, Brookfield Renewable Partners (NYSE:BEP) owns and operates renewable power assets. Per its website, Brookfield operates one of the world’s largest publicly traded, pure-play renewable power platforms. At the moment, BEP shares fell almost 19%, which again isn’t that bad compared to the S&P 500’s losses. Further, BEP features a market cap of 10.98 CAD (roughly $8.02 billion).
To be completely transparent, BEP has been trending downward since January 2021. Therefore, it needs a spark to get the ball rolling again. Fundamentally, that could arrive in the form of climate change dynamics, geopolitical pressures, or a combination of the two. Notably, Gurufocus.com labels Brookfield as a modestly undervalued business. Against traditional metrics, BEP’s price-to-sales ratio is just under 2 times. In contrast, the underlying industry features a median level of 3.5 times. Another factor to consider for investors seeking clean energy stocks to buy is that Brookfield’s operating margin stands at 27%, better than 70% of its peers.
Bloom Energy (BE)
Headquartered in San Jose, California, Bloom Energy (NYSE:BE) manufactures and markets solid oxide fuel cells that produce electricity on-site. Per its public profile, its fuel cells are subsidized by government incentive programs for green energy. Presently, Bloom Energy features a market cap of $3.4 billion. Since the beginning of the year, BE gave up about 22% of its equity value.
Generally speaking, Bloom brings much potential to the table; it’s just that Wall Street so far doesn’t consistently recognize the opportunity. Based on data from Google Finance, BE’s lifetime return at the time of writing sits at 23% below parity. Fundamentally, though, increased demand for clean energy stocks to buy may lift all proverbial boats.
Financially, Gurufocus.com labels BE as a modestly undervalued investment based on proprietary calculations. Against traditional metrics, investors will take comfort in certain growth stats. For instance, Bloom’s three-year free cash flow (FCF) growth rate stands at 37.7%, higher than over 79% of its peers.
Headquartered in San Jose, California, SunPower (NASDAQ:SPWR) is a provider of photovoltaic solar energy generation systems and battery energy storage products, primarily for residential customers. At the moment, SunPower features a market cap of exactly $3 billion. Since the start of the year, SPWR shed 20% of equity value. On the Nov. 2 session, SPWR dropped almost 6%, implying a discount for contrarian speculators.
Technically speaking, SPWR peaked in January 2021. Since then, shares appear to be forming a rounding bottom, suggesting a turnaround, perhaps in 2023. Fundamentally, this projection would make sense. As mentioned earlier, households recognize the value of systems that facilitate greater energy resilience. In addition, the cost savings may be attractive under this pensive economic environment.
Financially, Gurufocus.com labels SPWR as modestly undervalued based on proprietary calculations. For investors using traditional assessments, they should consider its three-year FCF growth rate of just under 60%. This ranks above nearly 85% of the competition, making BE one of the more attractive clean energy stocks to buy.
Ormat Technologies (ORA)
Based in Reno, Nevada, Ormat Technologies (NYSE:ORA) supplies alternative and renewable geothermal energy technology. As of January 2021, it owns and operates 933 megawatts of geothermal and recovered energy-based power plants. Currently, Ormat commands a market cap of $4.94 billion. Since the January opener, ORA swung up 12.5%.
Technically, Ormat represents a slow-and-steady bullish case among clean energy stocks to buy. Over the trailing five-year period, ORA gained over 36% of equity value. Fundamentally, geothermal energy solutions bring a compelling narrative to the mix. Essentially harnessing the power of the earth’s core, the energy outflow is practically limitless.
To be fair, though, narratives don’t always align with the financials. According to Gurufocus.com, ORA rates as modestly overvalued. Currently, traders pay 52.3-times forward earnings. Also, the balance sheet could use some shoring up, with the Altman Z-Score of 1.74 tilting toward the wrong direction of the stability spectrum. Still, the scientific proposition of geothermal may be attractive enough for some speculators.
NuScale Power (SMR)
Headquartered in Portland, Oregon, NuScale Power (NYSE:SMR) designs and markets small modular reactors (SMRs), which represent nuclear facilities featuring a smaller physical footprint. Per its corporate profile, NuScale received approval to build reactors in Idaho, in 2029 and 2030. Presently, it carries a market cap of $2.52 billion. Since the start of the year, shares gained 13%.
While nuclear power generates some controversy, it’s important to remember that it’s a zero-emission solution. Further, nuclear’s land footprint is relatively small. And with NuScale’s SMRs, that footprint will become even smaller. Indeed, NuScale represents one of the best clean energy stocks to buy because it can deliver energy supplies closer to the source of demand.
Admittedly, from a financial perspective, the framework for SMR stock remains speculative. It may be a long time before NuScale achieves consistent profitability. At the same time, investors should note that it enjoys a solid balance sheet. Primarily, the company features no debt, affording it tremendous flexibility.
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.