With President Obama's clean energy program safe for now, we decided to look for clean energy stocks that might be poised for new growth.
The Obama administration has announced that they will be continuing with a controversial program that gurantees loans for companies developing clean energy technologies. A hot topic throughout his reelection campaign, the President has had trouble selling the public on the program, which has had to assume the costs of helping some clean energy companies that failed, such as solar firm Solyndra, which went through bankruptcy.
However the government has only lost about 2% on its investmentments in these companies, although it has shelled out over $34 billion, much of it to young, risky firms.
As one of the most high-profile success stories of the program, government officials are quick to point to Tesla Motors (TSLA), which was able to pay back its loans before its deadline. The company is also close to being profitable without the subsidies it once needed to fund its operations, indicating the importance of these loans in allowing companies to invest in sometimes expensive new technologies.
So with a vast universe of clean energy stocks, which ones fared well despite concerns that this government program was in danger?
We decided to run a screen to find out.
To see if a clean energy company was potentially undervalued, we looked at the levered free cash flow to enterprise value ratio (LFCF/EV). This ratio looks at the amount of revenue a company generates against a valuation of its overall size. Enterprise value is calculated by adding together the market capitalization, debt, and preferred shares. If a company is bringing in lots of money relative to this number, then it might be an indication that the company is undervalued.
Starting with a range of 17 clean energy stocks sourced from our platform in Kapitall, we looked to see if any of these companies had LCEF/EV ratios that were greater than 10%. This means that a company is generating revenue that is greater than 1/10 of its overall value or higher.
We were left with two stocks.
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1.Green Plains Renewable Energy, Inc. (GPRE, Earnings, Analysts, Financials):Engages in the production, marketing, and distribution of ethanol and related distillers grains in the United States. Market cap at $474.12M, most recent closing price at $15.72.
Levered free cash flow at $131.59M vs. enterprise value at $860.95M (implies a LFCF/EV ratio at 15.28%).
2.First Solar, Inc. (FSLR, Earnings, Analysts, Financials):First Solar, Inc. manufactures and sells solar modules using a thin-film semiconductor technology. Market cap at $3.55B, most recent closing price at $39.83.
Levered free cash flow at $590.48M vs. enterprise value at $2.63B (implies a LFCF/EV ratio at 22.45%).
(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research. LFCF/EV ratios sourced from Google Finance. All other data sourced from Finviz.)
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Dig Deeper: Access Company Snapshots, Charts, FilingsGreen Plains Renewable Energy, Inc.(GPRE, Chart, Download SEC Filings) First Solar, Inc.(FSLR, Chart, Download SEC Filings)
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