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Although the issue remains a point of contention, increasingly, government agencies and a consensus of scientists have urged society to adopt a cleaner approach to infrastructure, thus boding well for green-focused energy stocks to buy. Most importantly, investors should consider this subsegment due to its lucrative profile.
For instance, McKinsey & Company estimates that by 2026, “…global renewable-electricity capacity will rise more than 80 percent from 2020 levels (to more than 5,022 gigawatts).1 Of this growth, two-thirds will come from wind and solar, an increase of 150 percent (3,404 gigawatts).” Therefore, green energy stocks to buy command a bright future.
This list of market ideas, they’re arranged in order of Wall Street analysts’ price target, from low to high. Therefore, even if you don’t agree with the underlying politics, these energy stocks to buy should still appeal to your capitalistic sensibilities.
Energy Stocks to Buy: Clearway Energy (CWEN)
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One of the largest renewable energy owners in the U.S., Clearway Energy (NYSE:CWEN) commands over 5,500 net megawatts (MW) of installed wind and solar generation projects. The company’s over 8,000 net MW of assets also include approximately 2,500 net MW of environmentally-sound, highly efficient natural gas generation facilities, per its website.
What should make CWEN an attractive candidate for energy stocks to buy centers on the value proposition. Presently, the market prices CWEN at a trailing multiple of 6.8. As a discount to earnings, Clearway ranks better than 80.72% of the industry. Also, CWEN trades at 5.41 times free cash flow (FCF), representing a discount that ranks better than 66.31% of its peers.
Turning to Wall Street, analysts peg CWEN as a consensus moderate buy. Most recently, RBC Capital reiterated a “hold” rating with a price target of $36, implying 9.82% upside potential. Overall, the consensus price forecast stands at $37.50, implying an upside potential of 14.4%. Thus, CWEN makes for a solid case for green energy stocks to buy.
Energy Stocks to Buy: Constellation Energy (CEG)
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One of the nation’s largest producers of carbon-free energy, Constellation Energy (NASDAQ:CEG) is a competitive retail supplier of power and energy products and services for homes and businesses across the U.S. Per its website, Constellation’s generation fleet produces enough energy to power 15 million homes.
Admittedly, the company could use some shoring up of its financials. For instance, its Altman Z-Score reading sits at 0.98, reflecting a distressed business. It also indicates a higher-than-normal probability of bankruptcy within the next two years. Also, its profitability metrics could be improved.
However, on the positive side, the market prices CEG at a sales multiple of 1.18. As a discount to the top line, Constellation ranks better than 69.47% of its competitors. Also, its enterprise-value-to-revenue ratio is 1.42 times, favorably lower than the industry median of 4.23 times. Currently, analysts peg CEG as a consensus moderate buy. Moreover, their average price target stands at $101.30, implying an upside potential of over 20%. Therefore, CEG ranks among the top clean energy stocks to buy.
Energy Stocks to Buy: NextEra Energy Partners (NEP)
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A subsidiary of NextEra Energy (NYSE:NEE), NextEra Energy Partners (NYSE:NEP) purchases and owns wind, solar power, and natural gas pipeline projects in North America. Since the Jan. opener, NEP gained a bit more than 2% of equity value. However, 2022 has been a choppy road for the subsidiary, with shares slipping 4%.
Nevertheless, NEP might attract speculators for its underlying value proposition. According to Gurufocus.com’s proprietary calculations for fair market value (FMV), NEP rates as modestly undervalued. On an objective basis, the market prices NEP at a trailing multiple of 12.78. As a discount to earnings, the company ranks better than 62.25% of industry players.
Also, it’s worth noting that on the bottom line, NEP features a net margin of 39.39%. This stat outpaces 87.56% of the competition. At the moment, Wall Street analysts peg NEP as a consensus moderate buy. Moreover, their average price target stands at $89, implying an upside potential of 23%. Thus, it’s another interesting idea for green energy stocks to buy.
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At first glance, Cameco (NYSE:CCJ) may not seem like an ideal candidate for green energy stocks to buy. According to its public profile, Cameco is the world’s largest publicly traded uranium company. However, nuclear power represents a zero-emission clean energy source. Therefore, go-green initiatives can’t ignore the sector, particularly because of nuclear fuel’s astounding energy density.
To be fair, investors will need to exercise some patience with CCJ at this juncture. And that’s because Gurufocus.com labels CCJ as a significantly overvalued investment. Plus, the market prices CCJ at a trailing multiple of 119.3, which is astronomical.
On the flip side, Cameco enjoys a stable balance sheet. In particular, its Altman Z-Score pings at 4.87, reflecting low bankruptcy risk. Also, after revenue fell sharply in 2021, Cameco is back on the upswing. On a trailing-12-month (TTM) basis, the company’s sales haul stands at $1.4 billion, almost at parity with 2020’s result. Right now, analysts peg CCJ as a consensus strong buy. Also, their average price target implies an upside potential of nearly 27%.
Brookfield Renewable Partners (BEP)
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A publicly traded limited partnership, Brookfield Renewable Partners (NYSE:BEP) owns and operates renewable power assets. As of the end of 2017, Brookfield Renewable owned over 200 hydroelectric plants, 100 wind farms, over 550 solar facilities, and four storage facilities, with approximately 16,400 MW of installed capacity.
According to Gurufocus.com’s proprietary FMV calculations, BEP rates as a modestly undervalued investment. On an objective basis, the market prices BEP at a sales multiple of 1.67. As a discount to the revenue line item, Brookfield ranks better than 62.63% of its rivals. Further, BEP trades at 5.6 times operating cash flow, below the sector median of 8.85 times.
Currently, Wall Street analysts peg BEP as a consensus moderate buy. To be fair, the most recent analyst rating saw Industrial Alliance Securities downgrade shares to a “hold.” However, the overall average price target stands at $35.96, implying an upside potential of over 30%. Thus, BEP ranks among the top green energy stocks to buy.
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An electricity power generator and wholesale marketing company, TransAlta (NYSE:TAC) operates 75 power plants in Canada, the U.S., and Australia. To be fair, it’s not a pure-play example of green energy stocks to buy. Still, it operates wind, hydro, and natural gas (the cleanest fossil fuel) generation facilities, as well as coal.
Generally speaking, TransAlta offers a solid fiscal profile. Operationally, the company’s three-year revenue growth rate stands at 8.6%, ranking better than 63.55% of the industry. On the bottom line, its net margin pings at 20.1%, outpacing 61.30% of its peers. As well, its return on equity rings the register at 8%, implying a quality business.
Despite these strengths, the market prices TAC at a sales multiple of 1.23. As a discount to revenue, TransAlta ranks better than 68.42% of its peers. Presently, Wall Street analysts peg TAC as a consensus moderate buy. In addition, their average price target stands at $12.19, implying an upside potential of over 33%.
Fusion Fuel Green (HTOO)
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An ambitious enterprise, Fusion Fuel Green (NASDAQ:HTOO) focuses on innovative green hydrogen solutions. Per its website, the company developed a revolutionary new electrolyzer design – the HEVO – that will allow it to produce hydrogen using renewable energy at highly competitive costs without any associated carbon emissions.
While compelling, prospective investors should recognize the risks associated with this pure-play candidate for green energy stocks to buy. For the year so far, HTOO dropped 21% of its equity value. And in the trailing one-year period, shares tumbled nearly 40%. Basically, it’s not for the faint of heart.
At the moment, Fusion Fuel offers some compelling stats, though we could be talking about a possible bear trap. For instance, the market prices HTOO at a trailing multiple of 2.1. As a discount, this supposedly ranks better than 96% of the competition. One decisively positive attribute stems from the balance sheet, specifically Fusion’s cash-to-debt ratio of 12.25 times. Despite the risks, H.C. Wainwright labels HTOO a “buy.” As well, it sees shares gaining over 314% from here. If so, it would be one of the best green energy stocks to buy.
On the date of publication, Josh Enomoto did not have (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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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