by Tom Konrad Ph.D., CFA

Why Green Buildings are Profitable Buildings

Buildings are responsible for approximately a third of greenhouse gas emissions, so making buildings more efficient and switching them to renewable sources of energy is an essential part in addressing climate change.

Fortunately, new technologies such as cold climate heat pumps, heat pump water heaters, induction stoves, as well as the ever falling cost of renewable electricity and improvements to insulation and building envelopes often provide opportunities to improve buildings while achieving extremely attractive investment returns from the energy and maintenance savings alone.

Because of the great financial returns, building owners who recognize and implement these opportunities are likely to be at a competitive advantage to those that continue with business as usual.  They will also be better prepared when governments require building owners to reduce greenhouse gas emissions as part of their own environmental efforts.

Real Estate Investment Trusts

Stock market investors can invest in real estate through a large number of publicly traded Real Estate Investment Trusts, or REITs.  Due to their special tax status (REIT income is not taxed at the company level if at least 90% of it is distributed to investors), REITs also often have relatively high dividend yields, making them attractive to income investors.

Nearly every REIT on the stock market has a sustainability page touting its green building achievements.  Unfortunately, often this is just greenwashing: highlighting a sustainable project or touting efforts to engage with tenants on renewable energy while continuing with business as usual across the rest of the portfolio.  

But this is not true for every REIT.  There are REITs that have made strong green commitments, and have the track records to back them up.  

REIT Industry ESG Report

To help me identify some of these truly green REITs, I started with the REIT Industry ESG Report 2022 published by the REIT advocacy organization, Nareit in July.  Since Nareit is an advocacy organization, we can’t expect it to publish an industry green ranking which might upset lower-ranked REITs, but it does contain 15 case studies.  

I went through these case studies, searching for convincing action on climate change.  I eliminated the ones that focused on single buildings, or on social issues (the “S” in ESG).  Of the ones that were left, here are the ones that seemed to be committed to greening their entire property portfolios.  I’ve written some short notes on the green efforts highlighted in the case studies, and included the page number in the REIT Industry ESG Report so you can read and decide for yourselves.

• Rexford Industrial Realty (REXR, p.36)  While this REIT is short on its list of achievements, it seems to be incorporating the environment in decision making processes. 
• American Tower Corp (AMT, p.57) The REIT’s business of sharing space on communication towers has a lot of inherent sustainability.  On top of this, they have significant fossil fuel usage reduction achievements and goals.
• Federal Realty Investment Trust (FRT, p 60) I have mixed feelings about this one… It does not build on greenfields (sites which had not been previously built on- a very important step) but makes no mention of energy usage at its properties. 
• Iron Mountain (IRM, p.62) – Has a very strict hour by hour clean energy sourcing goal which will likely drive innovation, plus a company wide process of energy use analysis and reduction.
• Prologis (PLD, p.66) – company wide commitment to green certifications on all new and redevelopment projects.Uses low carbon building products, and adopts energy reducing tech and renewable energy on its buildings.

There Are More

Note that this list is far from comprehensive… it’s just the five most convincing examples highlighted in the Nareit report.  Many other green REITs exist… my personal favorite being Hannon Armstrong Sustainable Infrastructure (HASI).

Note: This post was first published on my Patreon page.  You can gain an early look at drafts of my articles and other benefits by becoming a patron.

DISCLOSURE: Long HASI. A family member owns PLD.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Five Green REITs appeared first on Alternative Energy Stocks.

by Roel Aerts

Greystone Logistics (GLGI) designs and manufactures plastic pallets for the logistics industry. They use recycled plastic which would otherwise be destined for landfill. They grind and pelletize the plastic in house. Injection molding and proprietary resin blend is used to manufacture the pallets.

Greystone is headquartered in Oklahoma and has its manufacturing plant in Iowa.

Recent results and Financials

· The company had invested heavily in manufacturing equipment several years ago, that loaded them with quite some debt. Over the last years they worked on a massive reduction in debt. In 2 years they reduced it from 21.6M$ to 9.4M$ currently (debt minus cash).

· Very high free cash flow generation in fiscal 2021, 12M$. At this pace they theoretically could be debt free end 2022 if they choose to be.

· Gross margins of ~17% or higher from 2020 onwards (with the exception of last quarter). This was the effect of the investments in manufacturing equipment. Without being a subject matter expert, that sounds like a very high margin for a pallet, a commodity to me.

· High growth, 20% compounded growth in sales and gross margin from 2016 till 2020, 35% compounded growth in earnings. Shrinking numbers in FY2021. Can they pick up the growth path?

· Potential for reduced expenses in calendar year 2022, close to a million in interest payments vs. 2021 should they pay off the majority of debt, and several 100k$ in leases that run at lower lease cost in their last year.

· Last reported quarter, ending August 31 2021, was weaker than previous ones. Management attributes this to shortage of personnel in the COVID recovery and downtime on production machines. Driving down margins as well.

Outlook, growth opportunities

· Can they pick up the growth path from 2016 to 2020? Their high free cashflow should give them room to invest in growth. Growth stagnated and fell back in FY2021 and first quarter of FY2022. Global pallet market is forecasted to grow ~5% CAGR in the next years, however, Greystones growth potential is in customers that move from the omnipresent wooden pallets to plastics pallets. That growth rate could be, should be, much higher.

· Possible beneficiary of a green tailwind where customers want reusable, recycled solutions, often driven by consumer demand. Rising automation by pallet users could be growth driver as well

· “Greystone believes that the demand for its pallets is increasing which is primarily expected to have a positive impact on operations during the last half of the current fiscal year as well as future years.” (Quarterly report Oct 2021)

Management, board and investors

· Lots of skin in the game, CEO owns more than 34% of common stock.

· Second largest shareholder is a Director, together with CEO they each own 50% of the preferred shares, they control the board.

Excellent multiples (TTM):

· P/S 0.4

· P/E 4.2

· P/FCF 2.5

Risks

· Nano-cap, only 24M$ valuation, with corresponding risks associated

· High customer concentration, less than 5 customers account for more than 80% of revenue. There has been gradual improvement over the past years. Risks associated with most small-caps.

· Control of the board by 2 persons. Are their interests aligned with common shareholders? High insider ownership is usually a good thing; for micro-caps, total control by insiders is something to watch. How to be sure they don’t use the company as their private bank? (cf. Leases and loans directors have outstanding to the company; but those seem fair valued and limited in time, no signs this risk is materializing.)

Questions

· At what capacity level are they running?

Conclusion

This looks like a value play from the FY2021 numbers, but it could be an emerging growth story if they go try and pick up the growth path they were on in 2016-2020.

DISCLOSURE: Long GLGI

About the author: 

Roel Aerts is a retail investor with a focus on renewables and clean technology. Insights and analyses above are written for his own purposes and are shared to help others form an opinion and to gather feedback. It is not intended as investment advice and Roel is not an investment advisor.  Roel holds a master’s degree in Electrical Engineering and in Industrial Management.

The post Analyzing Greystone Logistics appeared first on Alternative Energy Stocks.

By Tom Konrad, Ph.D., CFA

Here are two more updates from last week on Patreon.  Also, I realize I neglected to publish the monthly performance chart for my 10 Clean Energy Stocks model portfolio here at the start of the month, so here it is as well:

Atlantica Sustainable Infrastructure Earnings

(published May 11th)

Atlantica Sustainable Infrastructure (AY) released its first quarter earnings announcement and financial statements on May 6th.

Atlantica is one of the higher yielding Yieldcos, 5.3% at the new quarterly dividend rate of $0.43 and a $32.50 stock price.  The dividend is safe, since most of Atlantica’s debt is fixed rate, non-recourse project debt which will be paid off before the project Power Purchase agreements expire.  

In addition to paying down debt, the company has also been investing in new projects, most recently a 49% stake in a 596 MW collection of 4 wind projects in Illinois, Texas, Oregon and Minnesota.  This has been financed by a well-timed issue of new equity in December, while the stock was trading at elevated levels with most other clean energy companies.  

The stock decline since then is getting me interested, and I have started selling out of the money cash-covered put to add to my current position.

Hannon Armstrong Selling Off Today- I’m Buying

(published May 12th)

This is going to be brief, but I wanted to give subscribers a heads-up.  Hannon Armstrong (HASI) is a unique REIT financing in renewable energy and energy efficiency.  Its investments typically are relatively senior (that is, they take losses last), making them safer than the typical equity investments of your average Yieldco.

Given the exposure to energy efficiency (a very difficult clean energy asset class to invest in), and the safety of its investments, HASI deserves to be in every clean energy income portfolio.  For the last few years, however, it has been selling at a large premium to the Yieldcos, so I’ve been slowly whittling down my stake.

The sell-off today (seemingly on inflation fears) looks like a great opportunity to buy some of that back (or, in my case, sell cash covered puts.)

Clearway Class A (CWEN-A) and Atlantica (AY) are also starting to look attractive.

DISCLOSURE: Long HASI, AY, CWEN-A.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Atlantica Q1, Buying Hannon Armstrong appeared first on Alternative Energy Stocks.

by Tom Konrad, Ph.D., CFA

My friend Jan Schalkwijk, CFA of JPS Global Investments just asked me if I had any thoughts on Kontrol Energy (KNR.CN, KNRLF), a Canadian smart building firm I had never heard of. (I just added it to AltEnergyStocks.com‘s Energy Efficiency and Smart Grid stock lists.)

The stock had just shot up after the client sold and went on a kayaking trip.  It had disclosed a sensor for detecting COVID-19 from the air.

While I didn’t have anything to say about the company, I did have some thoughts on dealing with the emotions around missing out.  Since it’s general advice, I thought readers here might appreciate it as well:

Speaking of gains that she might have had, she should ask herself if she missed out on a lottery ticket or if she made a mistake.  Every week, there is a lottery ticket that wins millions of dollars, but the wise investor does not play the lottery.  If the situation with Kontrol was one that she would never have anticipated, then it was simply a lottery ticket that she did not win… a lucky break for someone else, but not something to take personally.

If, on the other hand, it was something she could have anticipated if she had decided not to go kayaking, she should ask herself about her life choices.  Does she want to be a person who never takes a vacation and constantly watches the stock market in the hopes of someday getting a big win, or does she want to be a person who sometimes takes a break to maintain her mental health and relationships by reconnecting in the real world.  If the latter, then missing out on the occasional big win is part of the price…. but it also means missing out on the occasional big loss.  In this case it was a big win that didn’t happen… but there might also have been a bunch of big losses on all the other stocks she might have been obsessing about.

This sort of thing is all about life choices, and accepting the consequences.  Sometimes you go kayaking and the stock you sold goes to the moon.  Other times you go kayaking and the stock you sold goes bankrupt.  If you did not see it coming before you left, you should not take credit for the stock that goes to the moon, or take the blame for the stock that goes to zero.

The big difference is that you are less likely to remember the stock that went to zero after you sold.

Disclosure: No positions.

The post The Big Win You Missed appeared first on Alternative Energy Stocks.

Note: The following is a handout written by AltEnergyStocks Editor Tom Konrad at the request of a leading local Realtor where he lives in Ulster County, NY.  It is intended as a handout that local Realtors can give to new homeowners who express an interest in reducing their home energy use and using renewable energy.  Some of the information and may not be applicable if you live in other areas because of varying climate, energy costs, and regulation.  While most of the locally specific has been removed from this version, and the remainer is broadly applicable, homeowners in other parts of the country should look for similar, local resources specific to their climate and local regulations and incentives.  A good place to start is with your local electric utility.

Solar

What makes a home good for solar electric?

• New roof, metal roof, or roof in need of replacement (replace first.)
• Large, unobstructed roof surface(s) on the S, E, or W side, or unobstructed flat roofs.
• Trees or structures to the south (or SE for E facing roofs, and SW for W facing roofs should be more than twice as far from the roof as they are taller than it.  I.e. a tree standing 20’ to the south of a roof surface being considered for solar should be no more than 10’ taller than the roof, and should not be expected or allowed to grow past that height in 20 years.
• For homes with significant roof space, large electric bills due to electric heat, hot water, or electric vehicles improve economics.  Consider also adding Air Source Heat Pumps and Heat Pump Water Heater, described below. Electric vehicles can greatly increase your electricity usage; most EVs get approx 4 miles of range per kWh, or 2,500 kWh for 10,000 miles/year of driving.
• If you are not sure, solar installers will evaluate any home for free. They can often tell if your home is suitable using satellite imaging, so this can be as simple as a phone call or email.

Community Solar

If a home is not suitable for solar, a community solar subscription or purchase can still lead to significant savings on the electric bill.  The details and availability of community solar depend on your state’s regulators.

Fuel Oil and Propane

Fuel Oil and Propane are never green options, no matter how efficient your appliances.  Use as many of the strategies listed below to reduce or convert as much of your energy use to electricity as possible, with wood pellet stoves and boilers as an efficient alternative that minimizes pollution compared to cordwood stoves (even Energy Star rated stoves.)

Natural Gas

If your home has access to natural gas, many of the following efficiency measures described in what follows will be less cost effective if they reduce natural gas instead of fuel oil or propane usage.  Even when displacing natural gas, however, the efficient electrification strategies described below are the most environmentally sound options available.

Building Efficiency

Even newly built homes that were built to code can often benefit from cost effective air sealing and insulation.  This process starts with an energy audit, many of which are subsidized.  

The auditor will perform a blower door test and recommend a number of upgrades, which he/she may offer to perform.  These upgrades are typically chosen for quick payback and should be considered a bare minimum. Many more upgrades can be cost effective and also increase home comfort and health.

Typical Efficiency upgrades

Bare minimum

• Replace all lighting with LED
• Use low-flow shower heads
• Spray foam sealing of basement rim joist.  
• Air sealing around doors and windows.
• Blower door assisted air sealing
• Blow-in cellulose insulation in attics
• Heat Pump/ Hybrid Water Heater

To go beyond the bare minimum, you will want to work with a home energy efficiency specialist/ builder.

Home Heating

• Geothermal Heat Pump (both heat and A/C.) Can be expensive, but this is the most efficient option available. Some also produce hot water.
• Cold Climate Air Source Heat Pump (both heat and A/C) not as efficient as geothermal heat pumps, but usually a more cost effective option for well insulated houses)  Can be used to supplement other heat sources and still deliver cost savings if your home is not yet well insulated.
• Pellet stove (rebates available for replacing existing wood stoves)

Air Conditioning:

If you are installing or replacing an air conditioner, get a cold climate rated air source heat pump instead to also benefit from reduced heating costs in winter.

Ceiling fans are an inexpensive and extremely energy efficient supplement to air conditioning, not just an alternative to it. Look for Energy Star models.  By increasing air movement in occupied rooms, they can allow you to maintain comfort at a higher temperature.

Appliances – energy efficient and cost effective choices

Oven – Electric Convection

Range – Induction (requires steel or cast iron cookware, but better temperature control and power than gas or propane.)  Cheap induction hot plates are also available if you want to try out the technology or supplement your existing stove, but they typically lack the fine control and high power  available with a stovetop.

Hot Water – 

• Heat Pump or Hybrid Hot Water Heater 
• Solar Hot Water can be a cost effective option for large families, businesses, and multifamily dwellings that have large, consistent hot water demand.  Will require a supplemental source of hot water in winter.
• Solar hot water pool heating – an inexpensive and very cost effective option for extending the swimming season.

Dishwasher, Clothes washer – choose Energy Star models. Wash with cold water.

Clothes drying: 

• Consider a clothesline or drying rack (at least as a supplement.)  
• Condensing dryers (a technology often used in combination washer/dryers) are very energy efficient but are less effective at removing wrinkles than conventional dryers.
• Conventional electric dryers may be a little more expensive to run than propane dryers (depending on propane prices), but can use renewable electricity and allow for a larger solar installation if your home is suitable.

Refrigerator/Freezer. Configurations is very important to energy use; Energy Star only compares models with similar configuration/size/features.  Compare actual energy use ratings, not just if a model is Energy Star or not.

• Central Hudson will take away your old working fridge/freezer for free and give you $50
• Chest freezers are the most efficient stand alone models
• Top freezer refrigerator without through the door ice and water is the most energy efficient configuration.  

TV/Computer monitor: LED most efficient.  Avoid plasma TVs. Choose energy star models.

Electric Vehicle Charging

Electric Vehicles can charge from any 120V outlet, but they do so slowly and will only gain 30-40 miles range in a typical overnight charge this way.  This is a good option for people who do not drive much, or who purchase a plug-in hybrid electric vehicle, which combines a short electric range with a gasoline engine.

Most drivers considering a pure electric vehicle will want to install a “Level II” charging station.  This requires 240V power. The installation will be relatively easy and inexpensive if the home has its main panel or a subpanel located near the parking space where you hope to charge.  If you are already having electrical work done on your home, consider having an RV outlet (aka NEMA 14-50) installed near the parking space you intend to use. All the best electric vehicle charging brands come with plug-in options that use this type of outlet.   If you already have any 240 volt outlet such as a dryer outlet near where you park, you will also be able to purchase an EV charging station which can use that. Level 2 EV charging stations that use these types of outlets can be purchased for $200 to $900 depending on what features you want.  

If you think electric vehicles are too expensive, consider a used EV, especially as a second vehicle. They are surprisingly inexpensive.

The post The Basics of Residential Clean Energy For Realtors and Homeowners appeared first on Alternative Energy Stocks.

It’s almost always easier and cheaper to build an energy-efficient building in the first place than retrofitting existing structures. But humanity doesn’t always have that luxury.

by Tom Konrad, PhD., CFA

But if barriers can be overcome to bring some of the mass-production techniques used in new construction into energy retrofits, the economics and speed of building retrofits could be greatly improved — and the disruption to homeowners and building occupants greatly diminished.

“Cost is the biggest barrier,” said James Hartford, principal at New York-based River Architects, a sustainability-focused firm.

The techniques are proven, but we “need economies of scale and larger players involved to bring costs down,” Hartford said in a phone interview after his recent presentation at the ExNE Green Tech Conference

The Dutch model

One attempt to overcome these barriers is the EnergieSprong standard, a system that originated in the Netherlands. It uses mass-production techniques like pre-fabricated facades alongside aggregated demand among building owners to cost-effectively retrofit buildings to a net-zero energy standard.

RetrofitNY, a New York state-backed initiative, sent a team to the Netherlands to observe EnergieSprong techniques in action. The techniques were then used at a project for the Troy Housing Authority in upstate New York, funded by RetrofitNY.

Two innovative mass-production techniques stood out: reskinning the buildings and the use of packaged mechanicals.

In both cases, most of the work was done off-site. This has the advantage of both lowering costs and reducing disruption for occupants.

Building reskinning is accomplished by first making a detailed three-dimensional scan of the outside of the building. Insulating panels were then factory-built to fit over the existing building so that they could later be quickly installed on-site.

The EnergieSprong project also used packaged mechanicals from Dutch company Factory Zero, which takes components from leading manufacturers, and packages them into a single unit with their own control system and simple connections.

This greatly reduces and simplifies the building connections and the amount of work which needs to be done on-site.

The packages can include an air source heat pump, solar hot water pumps, and energy monitoring — all with a single integrated control module.

Can EnergieSprong Make The Leap To The U.S.?

Though such innovations are promising, the RetrofitNY team encountered barriers in bringing them back to the U.S. The first is the lack of economies of scale in a new market.

“Energy efficiency is largely driven by early adopters and family-owned construction companies,” said Hartford, whose firm worked on the project in Troy.  “We need an Amazon.”

While the Amazon of energy retrofits could be a long way off, Hartford noted there now are panel manufacturers “retooling for the reskinning approach.”

But Ravi Malhotra, Executive Director at iCAST, which managed the RetrofitNY project, thinks even that might not be enough to make building reskinning cost-effective. “In our mind, the EnergieSprong cladding was a non-starter.”

“Even the [less expensive] zip sheathing we came up with was a non-starter,” Malholtra told me. “The cost benefit was just not panning out.  We could put on more solar to get to net zero at half the cost.”

In addition to cost, there is the issue of long-term certainty with air sealing. “There was no guarantee,” Malholtra said.

“Fixing air sealing is both hard and expensive. It’s even harder to justify in retrofit… hardly anyone would reduce the size of their [heating and air conditioning] system, but the primary gain of air sealing is downsizing.”

In an email followup, Hartford strongly disagreed with Malhotra’s assertions about the cost effectiveness of building reskinning.  He also emphasized the comfort and health benefits of an improved building envelope.  In the case of the RetrofitNY project, however, it was ICAST and Malhotra who made the final decision on which building upgrades would be included.   ICAST is guaranteeing the energy performance of the project and bears the risk if the retrofit does not deliver the energy savings promised.

To succeed at scale, an energy retrofit technique needs both the support of architects and a project’s financial backers. While improved comfort is valuable, the RetrofitNY program is only compensating ICAST for energy savings.  If the program had included a financial incentive for comfort, building reskinning might well have made the cut.

The better options

In contrast, the potential for packaged mechanicals in the U.S. is much brighter.

According to Hartford, “If Factory Zero were here, we would have used it. Mechanicals in our project were specified separately. I suspect we could have saved considerable money by using a single provider doing the connections, and simpler connections would lead to multiple opportunities for savings.”

Malhotra agrees that packaged mechanicals could bring down the cost of U.S. retrofits, citing heat pump water heaters (HPWHs) as an example.

Compared to natural gas, HPWHs are “simply too expensive” for wide adoption, he said.

But an air source heat pump produces both space heat and domestic hot water, and this “adds a lot of efficiency.”

“The products are there but not available in the U.S.,” Malhotra noted.

Tom Konrad Ph.D., CFA is the editor of AltEnergyStocks.com.  This article was first published on GreenTech Media with significant improvements from GreenTech Media Managing Editor Karl-Erik Stromsta, and is reprinted with permission.

The post The Challenge of Scaling Up Building Energy Retrofits appeared first on Alternative Energy Stocks.

A review of Crystal Equity Research’s novel alternative energy indices found a number of companies that have delivered exceptional price appreciation over the last year.  Several were reviewed in the recent post “Alternative Returns” on May 8^th.  Expectations for growth appeared to be driving the price movement, so the last post “Quest for Growth” featured four companies from the indices for which analysts have posted high growth predictions.  Not unexpectedly some investors have already bid higher the stocks of those promising companies.

In this post we go back to the lists to find the companies with both high growth predictions and low price-earnings multiples.

Beach Boys Index  –  Methanol

Methanex Corporation (MEOH:  Nasdaq) products and sells methanol all over the world.   The shares are priced at 12.3 times the consensus earnings estimate for 2018, which is well below the 24.9 price-earnings multiple of the S&P 500 Mid Cap Index.  Investors might suspect the stock is ‘on sale’ for a reason.

Methanex earned a 15.6% operating profit margin on sales in 2017.  Even more impress was conversion of 25.7% of revenue to operating cash flow in the year.  The dozen or so analysts who have published research on Methanex appear to see a bright future for the company, predicting 13.0% compound annual growth over the next five years.  The group has been inching up quarterly earnings estimates over the last few months, suggesting Methanex is delivering on promised earnings.

Clearly financial performance is not a hindrance to full valuation.  Methanex shares are probably getting a cold shoulder because of the commodity nature of its product and the risk of cyclical downturn.  The industrial gases market trades near a multiple range of 17.0 to 19.0, which still makes Methanex look like a bargain.

Mothers of Invention Index  –  Grid Equipment

Utilities need to monitor their services.  Itron, Inc. (ITRI:  Nasdaq) provides solutions to measure, manage and analyze electricity, gas and water usage. The company has been a leader in efficiency and conservation, putting innovation into meters and communications. Most recently the company entered into a new agreement with Mississippi Power, a subsidiary of Southern Company (SO:  NYSE), to deploy a platform that will connect an advanced metering infrastructure for Mississippi Power’s customers.  Itron’s platform is expected to improve electric grid reliability and create efficiencies in power usage.  The back-office features are provided in the cloud as software-as-a-service.  Mississippi Power is trying to modernize its grid system in order to better deal with the extreme weather conditions that are found in the state.

Itron earned 7.9% operating profit on $2.0 billion in sales in 2017.  Sales-to-cash conversion was 9.5%.  Strong cash generation helps support the company’s debt load, which put the debt-to-equity ratio at 76.24 at the end of December 2017.

Itron’s shares are valued at 13.7 times expected earnings in 2018.  This compares to the electrical equipment sector, which has an average price-earnings multiple of 23.65.  Itron’s valuation seems like a good bargain give that analysts following the company expect 12.7% compound annual growth over the next five years.

The Atomics Index  –  Solar

The solar industry has been on a tear in recent months.  Rising demand is stoking the fires of interest in the sector even as an oversupply of solar modules in the U.S. has pressured manufacturers to reduce prices.  In recent weeks solar companies has received a boost from a new mandate in California requiring solar panels on most new homes.  The move has declared rooftop solar as a mainstream energy source and not just a luxury for a few wealthy homeowners.

Investors have already responded to the California news.  However, our search found one solar module producer that is still trading at an attractive multiple.  RenaSolar Ltd. (SOL:  NYSE) has had its share of trouble, but the single analyst who has stuck by the company sees a strong year ahead and expects growth to reach 15% per year over the next five years.  Earlier this month the company received an equity investment to support its solar power projects in China.  The company expects to have between 350 megawatts to 400 megawatts of power operations in China by the end of 2018.

The shares trade at 9.20 times the consensus estimate.  The average price-earnings ratio for the photovoltaic industry is 22.65.  Despite what is clearly an improved outlook for RenaSolar, the shares have not responded. The discrepancy between fundamental reality and valuation provides an opportunity for risk tolerant investors.

Electric Earth Index  –  Insulation

Insulation often gets overlooked as an energy efficiency solution.  Owens Corning (OC:  NYSE) produces and sells glass fiber reinforcements and other composites for use in residential and commercial buildings.  Its product lines fall in three categories:  composites, insulation and roofing. The company earned a 12.23% operating profit margin on $6.4 billion in sales in the year 2017.   Even more impressive was the conversion of 16% of sales to operating cash flow.

Owens Corning has lost market share in recent years as a major customer sought to diversify its supply chain for better pricing.  The competitors that had taken some of the company’s business have run out of capacity and Owens Corning is now taking back market share.  Owens Corning is better positioned with standby production capacity.

The details of building sector supply chain may be missed by some investors.  This might be one of the reasons Owens Corning’s fundamental performance has improved, but investors have yet to bid the share price higher.  The shares trade at 9.71 times the consensus estimate for 2018.  This compares to an average of 28.83 for the building materials industry.

Next post we look again at value in alternative energy companies from the perspective of growth.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

The post Bargain Priced Alternative Energy Stocks appeared first on Alternative Energy Stocks.

Energy efficiency stocks are publicly traded companies using a wide range of technologies to deliver the same energy services using less energy in the built environment. This includes efficient lighting such as LED lighting stocks, insulation, efficient motors, efficient appliances and appliance replacement services, sensor and control technologies, the internet of things, efficient power conversion and generation, and energy efficient design, construction, and retrofits.

See the list of efficient vehicle stocks and alternative transportation stocks for companies reducing energy used in transportation.

This list was last updated on 7/20/2022.

Acuity Brands(NYSE:AYI)
AIXTRON SE (AIXA.DE)
Ameresco, Inc. (AMRC)
Appliance Recycling Centers of American (ARCI)
Aspen Aerogels, Inc. (ASPN)
Carmanah Technologies Corporation (CMH.TO, CMHXF)
ClearSign Combustion Corporation (CLIR)
Compagnie de Saint-Gobain S.A. (SGC.PA, CODGF)
Cree, Inc. (CREE)
Energy Focus (EFOI)
Energy Recovery (ERII)
EPISTAR corporation (2448.TW)
FLIR Systems, Inc. (FLIR)
Hannon Armstrong (HASI)
Kingspan Group plc (KGP.L)
Koninklijke Philips N.V. (PHG)
Kontrol Energy (KNR.CN, KNRLF)
Lighting Science Group Corporation (LSCG)
Lime Energy (LIME)
LSB Industries, Inc. (LXU)
LSI Industries Inc. (LYTS)
Neo-Neon Holdings Limited (1868.HK)
OMRON Corporation (6645.T, OMRNF, OMRNY)
Orion Energy Systems, Inc (OESX)
Owens Corning (OC)
Power Integrations, Inc. (POWI)
Revolution Lighting Technologies, Inc. (RVLT)
ROCKWOOL International A/S (ROCK-B.CO, ROCK-A.CO, RKWBF)
Rubicon Technology, Inc. (RBCN)
SemiLEDs Corporation (LEDS)
Universal Display(OLED)
Veeco Instruments Inc. (VECO)
Waturu Holding A/S (WATURU.CO)
Willdan Group, Inc. (NASDAQ: WLDN)
Zumtobel Group (ZMTBF, ZAG.VI)

If you know of any energy efficiency stock that is not listed here and should be, please let us know by leaving a comment. Also for stocks in the list that you think should be removed.

The post List of Energy Efficiency Stocks appeared first on Alternative Energy Stocks.

LED lighting stocks are publicly traded companies involved in the manufacture or deployment of efficient LED lighting technology.

AIXTRON SE (AIXA.DE)
Acuity Brands (AYI)
Amtech Systems Inc (ASYS)
Applied Materials (AMAT)
Carmanah Technologies Corporation (CMH.TO, CMHXF)
Cree, Inc. (CREE)
Energy Focus (EFOI)
EPISTAR corporation (2448.TW)
Koninklijke Philips N.V. (PHG)
Lighting Science Group Corporation (LSCG)
Lime Energy (LIME: Nasdaq)
LSI Industries Inc. (LYTS)
Orion Energy Systems, Inc (OESX)
Osram Licht AG (OSAGF, OSR.DE)
Neo-Neon Holdings Limited (1868.HK)
Revolution Lighting Technologies, Inc. (RVLT)
Rubicon Technology, Inc. (RBCN)
SemiLEDs Corporation (LEDS)
Trans-Lux Corporation (TNLX)
Universal Display(OLED)
Veeco Instruments Inc. (VECO)
Zumtobel Group (ZMTBF: OTC or ZAG.VI)

If you know of any LED lighting stock that is not listed here and should be, please let us know by leaving a comment. Also for stocks in the list that you think should be removed.

The post List of LED Lighting Stocks appeared first on Alternative Energy Stocks.

Last week shares of Universal Display (OLED:  Nasdaq) closed down 15.8% on the week.  The price move was a surprise, especially for Universal’s ebullient management team.  The company had reported sales and earnings well above expectations for the fourth quarter ending December 2017, as the market embraces the company’s proprietary energy-saving display technology.  The consensus had been for $0.85 in earnings per share on $100 million in total sales for the quarter. Management delivered.

Sales in the quarter totaled $115.9 million as sales of proprietary PHOLED phosphorescent materials soared.  Net income was $32.8 million or $0.69 per share.  Excluding a one-time write-off of deferred tax assets of $11.5 million triggered by recently enacted tax law changes, net income was $44.3 million or $0.93 per share.

There had been quite a divergence in view on the quarter with sales estimates ranging from $95.8 million to $105 million and earnings estimates ranging from $0.74 to $0.91.   Nonetheless, investors had to recognize that the company had trounced earnings expectations for quarter  –  even the high-end of the range of contributions to the consensus.

Despite this exciting development shares of Universal Display gapped dramatically lower in the first day of trading following the earnings announcement.  Heavy trading volume made it clear that disenchantment was widespread.

In the earnings release management provided guidance for 2018 sales in a range of $350 million to $380 million.  Analysts had already anticipated a significant increase in earnings in the current fiscal year to $3.10 per share on $398.2 million in total sales.  Contributions to the consensus estimate ranged as high as $3.37 in earnings per share on $433.7 million in total sales.  Even the lowest contribution to the consensus estimate of sales was $370.0 million.

Especially following the stellar performance in the fourth quarter, guidance below the current consensus view had a dramatically chilling effect on analysts and investors. As traders listened to management comments during the earnings conference calls, disappointment gathered steam.

Sales for the full year 2017, were $335.6 million, providing $103.9 million in net income or $2.18 per share.  Excluding the effects of the tax asset write-off net income was $115.4 million or $2.43 per share.  Guidance for the quarter appeared to suggest that the pace of market penetration would largely come to a stop.

The tepid guidance appears to have taken analysts and investors by surprise.  The company recently invested $15 million in an Ohio manufacturing facility, doubling commercial production capacity for PHOLED emitters.  If there was any doubt about the chances of filling up new production capacity, it was at least partially dispelled by new evaluation agreements with Royale, Sharp and GovisionX Optoelectronics.  A long-term agreement to supply Samsung Display had recently been extended to the year 2022, and the company had signed a new license and material supply agreement with BOE Technology Group, one of the largest display manufacturers in the world.

All signs have been pointing at continue sales strength.  Investors are now faced with the tough choice of accepting wholesale management’s low guidance or accepting management’s description of strong market penetration activity.  It seems traders have already weighed in on the choice by exiting the stock entirely. There is rarely high tolerance for miscues from management.

The stock sell-off might have been warranted one way or the other.  The trailing price earnings multiple was 63.7 times, based on the stock price prior to the sell-off and earnings adjusted for the deferred tax asset charge.  Following the sell-off the multiple dropped to 53.7 times.  Thus even after the sell-off the stock still appears to be valued on very generous terms.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.  OLED was previously included in the coverage group of Crystal Equity Research.  Coverage was concluded with a Sell rating.

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