Undervalued renewable energy stocks are in the spotlight amid a shift in the global energy mix. The renewable energy industry is forecast to grow 16.8% annually until 2031, illustrating its systematic potential.
Despite the industry’s resilient growth rate, many renewable energy stocks remain undervalued. As such, I decided to embark on a journey to find three best-in-class renewable energy stocks to invest in. Methodologically, my screening process focused on fundamental aspects, valuation multiples and event-based inflection points. Moreover, I backed in technical analysis to ensure complete alignment.
Renewable energy stocks might not be for everyone. However, I believe they contribute to a well-rounded investment portfolio. If you share my vantage point, here are three undervalued renewable energy stocks to consider.
Person holding cellphone with logo of U.S. solar energy company Sunrun Inc. (RUN) on screen in front of business webpage. Focus on phone display.
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Sunrun (NASDAQ:RUN) is a top pick at Soros Fund Management, which recently snapped up 2.08 million of RUN’s shares. Although this is an isolated event, George Soros’s interest is telling, given his firm’s reputation and large following.
Furthermore, Sunrun’s fundamentals seem to have reached an inflection point. For example, the company announced in June that it secured the largest-ever securitization in the solar industry, $886.3 million in funding, illustrating investors’ confidence in its prospects. Moreover, Sunrun has experienced solid fundamental momentum, revealing a 15% increase in customer uptake during its first quarterly, communicating the company’s scalability.
A concern about Sunrun is that it is operating at a net loss. However, blitzscaling is arguably more important than profitability for the time being. Therefore, I think RUN stock is a buy, especially considering its financial market-based dynamics, which include a price-to-book ratio of 0.54x and an $18 per share price target from Goldman Sachs (NYSE:GS).
Canadian Solar (CSIQ)
Canadian Solar (CSIQ) logo on the mobile device. Canadian is a company that manufactures photovoltaic solar modules and provides ready-to-use solar power solutions.
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Canadian Solar’s (NASDAQ:CSIQ) stock is a classic event-driven opportunity. In May, the company revealed that its subsidiary, Recurrent Energy, had secured a $1.4 billion debt facility to aid its expansion venture, which includes constructing several new solar plants in Europe. Additionally, Canadian Solar announced last month that it had opened a new photovoltaic modules assembly plant in Texas, allowing it to produce 20,000 high-power models daily.
CSIQ stock has slumped by nearly 10% in the past month, suggesting investors have yet to price the abovementioned variables. Despite this, rejuvenated systematic support will lend Canadian Solar a helping hand, allowing its recent events to influence its stock price.
Unlike Sunrun, Canadian Solar is profitable and operates at a net profit margin of 2.8%, which I deem favorable. Moreover, CSIQ stock’s price multiples signal deep value. For instance, CSIQ stock has a price-to-sales ratio of merely 0.15x and a price-to-book ratio of 0.41x.
Northland Power (NPIFF)
Environmental protection, renewable, sustainable energy sources. Plant growing in the bulb concept. renewable energy stocks to buy
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Northland Power (OTCMKTS:NPIFF) is a departure from the solar pure play stocks mentioned earlier in the article. Instead, the company accesses the renewable energy industry by engaging in infrastructure. The firm’s end markets include wind energy, solar, and natural gas. Moreover, Northland Power is geographically diversified, operating in regions such as North America, South America, and Europe.
I’m in favor of NPIFF stock for a few reasons. Firstly, the company and its investors experienced a welcoming surprise earlier this year when BMO Capital reiterated its “outperform” outlook on NPIFF stock. Sequentially, Northland Power released a promising first-quarter earnings report, revealing C$754.92 million in revenue, a 21.4% year-over-year increase.
Furthermore, Northland Power has showcased alluring market-based metrics. For example, the stock has formed a momentum trend by trading above its 10-, 50-, 100- and 200-day moving averages. Better yet, NPIFF stock’s price-to-sales ratio of 2.54x is at a five-year discount of about 33%, indicating that NPIFF stock has relative value in store.
I’m not saying Northland Power’s stock is a guaranteed winner, folks. However, don’t be surprised if it skyrockets in the next year!
On the date of publication, Steve Booyens did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Steve Booyens co-founded Pearl Gray Equity and Research in 2020 and has been responsible for cross-asset research and PR ever since. Before founding the firm, Steve spent time working in various finance roles in London and South Africa. He holds an MSc in Investment Banking from Queen Mary – University of London. Furthermore, Steve obtained his CFA Charter on April 26, 2024, and is working toward his Ph.D. in Finance. His articles are published on various reputable web pages such as Seeking Alpha, TipRanks, Yahoo Finance, and Benzinga. Steve’s articles on InvestorPlace don’t constitute financial advice. However, they form an interesting juxtaposition between mainstream opinion and objective theory, allowing readers to benefit from unbiased commentary. Readers can expect coverage on frequently traded stocks, REITs, fixed-income funds, CEFs, and ETFs.