With the evolving need for sustainable energy investments, Maxim Manturov, Head of Investment Research at Freedom Finance Europe, advises on the hottest renewable energy stocks to watch in 2021.
Renewable energy stocks have the potential to deliver immense returns for investors, all the while creating a positive environmental impact to our world. The popularity of such stocks therefore comes as no surprise given the publicity around climate change and will only continue to grow as environmental-focused discussion is pushed to the fore.
With this in mind, Maxim sheds light on some of the top renewable energy stocks, how investors can determine good, green investments, and the initial public offerings (IPOs) to watch out for in 2021.
Renewable energy stocks: which ones are top for value, growth, and momentum?
- The alternative energy stocks with the best value are those which have the lowest price to earnings (P/E) ratio. As shareholders may get their earnings back as dividends or buyouts, a low P/E means you pay less for each dollar earned.
- SunPower Corp (SPWR) provides products, systems, and services for solar energy production, with the target audience being both individuals and enterprises. The P/E is currently at 8.03, while the average target price predicted by investment banks is at $30.40. The upside potential is estimated at over 40%.
- First Solar, Inc (FSLR) manufactures solar energy systems and modules through thin film semiconductors. With the P/E at 14.91 and the average target price of $81.90, the ROI may reach 13.40%.
- The alternative energy stocks with the best growth have the largest earnings per share (EPS) value posted over the latest quarter, YoY. Essentially, more money spent means the business is growing and cash is reinvested or paid to shareholders.
- SunPower Corp (SPWR), as mentioned above, is a great investment candidate here, with a huge EPS growth of 727.50%, QoQ.
- Daqo New Energy Corp (DQ), a solar energy company based in China, produces polysilicon for solar element and module manufacturers. Its EPS is 252.20% QoQ, and the average target price given by investment banks is $104.90, which makes the upside potential over 40%.
- The alternative energy stocks with the best momentum have the largest total income over the last 12 months.
- Sunworks, Inc (SUNW) offers high-performance solar energy systems, as well as project management services in the same domain. SUNW stock added 2,755% to its price over the last 12 months. Currently, the target price is $10.70, and the upside potential is around 30%.
- ReneSola Ltd (SOL) is a global renewable energy company, which designs and manages energy projects, mostly focusing on solar energy. Over the last 12 months, the stock went up by 780%. The average target price given by investment banks is at $13.50, the upside potential is around 80%.
How can investors find good renewable energy investments?
Renewable energy companies generating free cash flow and good balance sheets have a competitive edge over the financially weaker ones, as such companies have better access to capital to invest in further growth. Investors should also look towards companies that invest in potentially profitable renewable energy projects, as well as those that manage capital in a way to maintain a good financial portfolio.
How fast is green energy growing?
Green energy is growing exponentially. According to the International Energy Agency (IEA), the renewables market reached 30% of the world’s electricity generation capacity in 2020. This will only continue to grow, leaving coal behind and making renewable energy the world’s largest source by 2025, having around 33% share, the EIA reports.
Solar energy will mostly be driving this growth, as it is expected to be cheaper than creating new gas or coal plants in most countries. In fact, solar plants are one of the cheapest ways ever invented to generate energy. Wind energy and other low carbon sources are also considered as potentially successful by the EIA, as the world is becoming green-energy friendly. One issue here, however, is the financing, as green energy needs more investment than existing capital. Then again, those with a keen eye will look at this as an opportunity instead.
Three hottest renewable energy IPOs in 2021
- China Three Gorges Renewables (Group) is a part of the China Three Gorges Corporation, the largest hydraulic power production company. The IPO should take place in 2021 in China, with initial listings set at $3.95B.
- Acciona Energia is a renewable energy company forming part of Acciona. After posting good financial figures for Q1, it published an IPO plan, aiming to increase its photovoltaic system capacities with the investments raised from this offering.
- Infinite Blue Energy is working on a green hydrogen energy project. Its first plant, Arrowsmith, is expected to generate up to 25 tons of green hydrogen out of non-carbon sources, such as water, sun, and wind. Most Infinite Blue Energy’s projects are going to be based in Australia, and one of its long term contracts already includes supplying hydrogen energy to a road facility provider in Western Australia.