Green Your Portfolio With These Stocks
August 02, 2022 at 06:05 AM EDT
Green energy stocks increasingly find their way into portfolios as the green economy becomes a major theme for investors. Adding to the momentum is climate-change policy, and as a result, green companies are likely to attract record levels of capital.
3 Green-Era Stocks To Consider
NextEra is the third largest utility company in the United States and is increasingly investing in the green economy to get to what they call "Real Zero." Net Zero includes offsets and reduction; meanwhile, Real Zero emissions are when there are zero net carbon emissions.
NextEra currently has 58 GW of power generating capacity under management and plans to invest $50-55 billion in new capital over the next year. The company provides over 5 million customers rate-regulated electricity and over 10 million people electricity across mostly Florida. Along with its affiliates, it is the largest provider of renewable energy, which includes both wind and sun energy.
The general environment is favorable for renewable energy as the price of commodities such as natural gas, and other sources of energy such as coal, continue to increase. Furthermore, the increasing investment in green energy by both the U.S. government and private investment should help NextEra push up its sales to record levels over the coming years. And with the company benefitting from rising energy prices, the company is well-placed to enjoy a strong run of results.
NextEra’s valuation remains a bit expensive, with price-to-sales at (P/S) at 9.53 and price-to-book (P/B) at 4.53, and price-to-earnings (P/E) at 65. An increase in margins and improvements to cash flow is expected to push forward P/E to 30x, but questions remain as to whether growth is sustainable.
Overall, the stock remains in favor of investors, who are increasingly betting on the increased flow of capital to the green economy to help drive the stock to record levels.
Weyerhaeuser is a timberland management company that owns 12.4 million acres of timberland across the United States, along with another 14 million acres in Canada. Weyerhauser remains committed to the sustainable farming of timber and has been given multiple awards for its sustainable practices.
The company continues to enjoy strong results mostly as demand remains strong, and inflationary pressures have pushed lumber prices to multi-year highs. One of the factors that is driving demand is a shortage of homes. Although home demand is facing the issue of increasing mortgage rates, many millennials are looking to still buy homes, and with multi-year backlogs, lumber demand is not likely to decline anytime soon.
Weyerhaeuser had a weaker than expected previous quarter, with the price of lumber falling, but the company remains a cash-flow machine, as net cash from operations continued to be above $1 billion. Despite lumber prices falling precipitously, revenue fell by only 6%, but earnings per share came in 22.6% lower than the previous year. Competitors such as Boise Cascade (NYSE: BCC), have a much lower valuation with P/E at 3x earnings, but the difference can largely be attributed to Weyerhaeuser's cash flow. Despite issues in the previous quarter, the company's valuations remain attractive at 15x P/E, and the stock is positioned for another run as the next set of earnings are reported.
Clean Harbor Inc. is an American provider of environmental and industrial services. The company provides industrial and hazardous waste management services, across the United States, including to many Fortune 500 companies. The company currently runs over 400 waste management sites and 50 hazardous waste management facilities. The stock is currently down 14% from its 52-week high and is holding up quite well despite a broad market sell-off.
As a result of better business dynamics, Clean Harbor continues to enjoy higher growth than the industry average, and with the potential for improved profit margins due to improved pricing, and higher volumes, the stock may head higher in the near future. Clean Harbor's earnings have continued to beat analyst expectations, and with earnings being reported soon, the stock may see another leg upwards. Furthermore, a valuation of 23x means investors are likely to take a second look as earnings are reported.