Monsanto Company (MON), Green Plains Renewable Energy Inc. (GPRE): Why Biotechnology Is Set to Bloom and Boom

Green Plains Renewable Energy Inc. (NASDAQ:GPRE) is well-positioned to take advantage of increasing demand for fuel. With a market cap of $426 million, Green Plains Renewable Energy Inc. (NASDAQ:GPRE) is one of the largest up-and-coming biofuel companies in the world. Despite its strong earnings growth potential, the company has a modest trailing P/E ratio of 15.81. While its gross profit margin is currently a meager 0.78%, it is important to remember that Green Plains Renewable Energy Inc. (NASDAQ:GPRE) is a new company still in the growth stage. Its revenue already stands at $3.5 billion, though this has declined 1.3% YOY.

Admittedly, an investment in any company at such a stage in its life cycle represents a risk. However, Green Plains could be a huge winner in the future. Green Plains Renewable Energy Inc. (NASDAQ:GPRE)’ biggest risk is that the biofuel industry is currently dependent on government support. With ongoing federal and state budget cuts, there is a risk that the US government will cut funding to the sector, which could hurt biofuel companies in the short term.

Closing Thoughts on Biotechnology

Some investors might be worried that the biotech industry is overheating. While this is a legitimate concern, hot growth in the sector is due to the strong future earnings potential of biotech firms; they stand to be big winners as consumer demand for food and fuel spikes. This means that the right biotechnology investment now could pay off big in the future. As research-based companies, biotech firms are high-risk since their research could fail. Still, these risks are outweighed by the strong potential for growth, and mitigated by investing in larger, more diversified, companies.

The article Why Biotechnology Is Set to Bloom and Boom originally appeared on Fool.com and is written by Colin Tweel.

Colin Tweel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Colin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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