Finding the companies
Finding renewable-energy companies that are publicly traded is actually quite a hard task. I wanted to make sure that we had a bit of diversity in what we’re looking at. Unfortunately, most of the weird and wacky companies are just too small to even consider exploring. So, here I bring you the most diverse bunch available.
We have, fighting out of the solar corner, First Solar, Inc. (NASDAQ:FSLR) and SunPower Corporation (NASDAQ:SPWR). Meanwhile, in the ethanol-power corner, we have Green Plains Renewable Energy Inc. (NASDAQ:GPRE). So, while it’s not the most diverse bundling of companies, we do get a look at three of the biggest names in renewables.
“If you’re not first, you’re last” – Ricky Bobby
I’m not sure why that quote is there, it just popped into my mind when thinking about First Solar. It probably makes even less sense when you consider that First Solar, Inc. (NASDAQ:FSLR) is far from profitable.
First Solar, Inc. (NASDAQ:FSLR) manufactures solar modules using its proprietary technology. These modules are then sold around the planet. The problem with the company is that it is trying to sell people things that are constantly dropping in price as the technology improves. This is something that is bound to lead to further declines in free cash flow as time goes on.
When it comes to sales of these photovoltaic cells, First Solar, Inc. (NASDAQ:FSLR) is doing quite well. The company sold approximately $3.4 billion worth around the world in 2012. That’s a value that has been consistently on the rise for the last decade. The real problem for the company comes when you look at its net income.
First Solar, Inc. (NASDAQ:FSLR)’s net income is incredibly shaky. This is because of the ever-declining prices of photovoltaic cells. First Solar has lost money in each of the last two years, but prior to that it was making more than $500 million on approximately $2.5 billion in revenue.
Unfortunately for First Solar, Inc. (NASDAQ:FSLR), the company’s analysts don’t believe a comeback is likely. Analysts have actually forecast growth over the next five years of -22.5%. I don’t need to tell you that this is something we won’t want to be investing in.
Won’t get fooled again?
Let’s see if we have better look with SunPower Corporation (NASDAQ:SPWR). This company offers a bit more than First Solar in that it designs, manufacturers, delivers, installs, and even monitors power units for residential and commercial customers. Whoa, that was a mouthful.
Unfortunately, right off the bat, we see that SunPower Corporation (NASDAQ:SPWR) is losing money. Unlike First Solar though, there was considerable growth in net income over the last year, which could potentially brighten the days of SunPower Corporation (NASDAQ:SPWR)’s investors (I think that pun may have been intended.)
Analysts are a bit more positive on this company; their overall rating for it is a ‘hold;’ that’s better than the ‘sell,’ which was carried by First Solar.
Looking at the growth numbers analysts have given, we can see that they actually believe growth will occur over the next half-decade to the tune of 7.5%. That’s not beating the S&P 500 as a whole (9.9%), but it is a start.
What if it’s dark out?
If it’s dark out, you’re likely not keeping the power going. Don’t you worry though, Green Plains Renewable Energy Inc. (NASDAQ:GPRE) has your back. The company is one of the largest producers of ethanol fuel in the United States, which makes the company worth right around $400 million.
Ethanol is a fuel that is produced from biomass, and the sugars found in crops such as corn. The company has the capacity to produce more than 740 million gallons per year.
Sales at this biofuel company sat at just $24 million in 2007 and have since grown to $3.5 billion. The company, quite unfortunately, only generated about $11.8 million in net income from that huge sales number. At least we know there is a lot of room for improvement.
Analysts see some growth occurring at the company in 2013 (I should point out only two analysts cover the stock). On average, they have an EPS estimate of $0.52. That’s enough for a 33% boost over the prior year. Projected performance numbers in 2014 are back to dropping though as a single analyst believes $0.33 is the likely EPS.
Investor takeaway
I would avoidGreen Plains Renewable Energy Inc. (NASDAQ:GPRE) at the moment. One of the main reasons for that is due to the effects that biofuels are having on the world. While they may by reducing carbon emissions (some debate they are not), they do use up many crops that could be used for eating, particularly in impoverished nations.
First Solar, Inc. (NASDAQ:FSLR) has those unattractive analyst estimates, and they definitely make me shy away from the stock. I’d probably take a little deeper of a look if the company was expected to at least stay stagnant over the next five years.
If you want into renewables, then there’s no doubt that SunPower Corporation (NASDAQ:SPWR) is an excellent starting point. Analysts believe it will grow, and there’s plenty of houses around the United States that this company could slap solar panels onto.
The article Can Renewables Renew the Life of Your Portfolio? originally appeared on Fool.com and is written by Ash Anderson.
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