The growth of the clean energy industry has been driven by increasing global awareness, cost reductions and technological advancements. Investors’ interest in renewable energy stocks is evident in  iShares S&P Global Clean Energy Index Fund’s (ICLN) 149.5% gains over the past year.

According to Lazard, wind power was 71% cheaper in 2020 than in 2009, and the cost of solar energy fell  by 90%. While the clean energy industry was driven mainly  by speculative behavior last year, the incoming Biden administration’s $2 trillion Green New Deal proposal should help the industry tremendously through capital inflows.

While  renewable energy companies have been gaining much more attention in the recent months, not all companies have been making headlines. Iberdrola, S.A. (IBDRY), Vestas Wind Systems A/S (VWDRY), and Sunrun Inc. (RUN) are three  lesser-known companies that we expect to generate handsome  returns in the near term based on their rapid market expansion and strong financials.

Iberdrola, S.A. (IBDRY)

IBDRY is the largest producer of wind power and one of the world’s biggest electricity utility companies in terms of market capitalization. The company is engaged in the generation, transmission, distribution, and supply of electricity in Spain and internationally. It generates and markets electrical power using renewable sources, such as onshore and offshore wind, hydro, solar thermal, photovoltaic, and biomass, among others.

The company’s revenue  increased 10.5% sequentially for the quarter ended September 30, 2020. Its net profit has increased 4.7% year-over-year for the nine months ended September 30, and net production has increased 7.2% year-over-year to 120,350 GWh. While its  net production in the U.K. region has increased 46.9% year-over-year to 4,717 GWh, net production in the U.S. region has increased 8.8% year-over-year to 16,659 Gwh.

The consensus revenue estimate of $47 billion for the fiscal period ending December 31, 2021 represents an increase of 5.7% year-over-year. Over the past year, the stock has rallied 36.5% to close Friday’s trading session at $57.53.

IBDRY announced on January 15, that it has applied for regulatory approval for 500 new green MW in Castilla y León. The company plans to develop more than 2,400 renewable MW — wind and photovoltaic — in the coming years in the region. Once operational, this plant is expected to generate enough clean energy to supply a population equivalent to 290,000 homes.

On January 14, Total, which is a global broad energy company and experienced offshore operator in the Danish North Sea, joined forces with IBDRY to develop plans for an offshore wind farm named Thor in Denmark. Thor is expected to be one of the largest offshore wind farms in the world with a capacity between 800 MW to 1,000MW.

How does IBDRY stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

B for Industry Rank

A for Overall POWR Rating

The stock is also ranked #2 of 58 stocks in Utilities – Foreign industry.

Vestas Wind Systems A/S (VWDRY)

Headquartered in Denmark, VWDRY designs, manufactures, installs, and services wind turbines worldwide. With more than 122 GW of wind turbines in 82 countries, VWDRY has installed more wind turbines than any other company . The company operates through two segments — Power Solutions and Service. The Power Solutions segment sells wind power plants, wind turbines, development sites, etc., and the Service segment is engaged in the sale of service contracts, spare parts, and related activities.

With its highest ever quarterly deliveries, the company delivered a strong performance in the third quarter (ended September 30, 2020). Deliveries to customers increased 44% year-over-year to 5,991 MW. Driven by the increase in activity in China, the company’s deliveries in  the Asia Pacific region increased 67.1% year-over-year to 931 MW. VWDRY’s top line increased 30.8% year-over-year. In the service segment, the company reported a revenue growth of 14% year-over-year and EBIT margin of 28.6%.

VWDRY  announced in late  December that it had received a 504 MW order for an undisclosed project in Colombia. The contract includes the supply and installation of 90 V162-5.6 MW EnVentus wind turbines and  a 15-year Active Output Management 5000 (AOM 5000) service agreement. The company has also received a 51 MW order for an undisclosed project in Italy, which includes the installation of eleven V136-4.2 MW wind turbines.

Also in December, VWDRY announced that it has received a new order from one of its existing customers, MSPL Limited, for its 17 MW Hospet project in Karnataka, India.

The consensus revenue estimate of $19.95 billion for the fiscal period ending December 31, 2021 represents  an increase of 11.7% year-over-year. The stock has gained 128.2% over the past year and is currently trading 14.5% below its 52-week high of $77.80.

VWDRY’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade, and a “B” for Buy & Hold Grade and Industry Rank. Among the 52 stocks in the Technology – Hardware industry, it is ranked #26.

SunRun Inc. (RUN)

Founded in 2007, RUN is engaged in the design, development, installation, sale, ownership, and maintenance of residential solar energy systems in the U.S.  The company pioneered home solar service plans to make local clean energy more accessible for little to no upfront cost. Its primary customers are residential homeowners. RUN markets and sells its products through direct-to-consumer approach across online, retail, mass media, digital media, canvassing, field marketing, and referral channels.

For the third quarter ended September 30, 2020, the company’s revenue increased 15.7% sequentially to $209.76 million. Its revenue generated from customer agreements and incentives, which accounted for nearly 55% of total revenue, increased 18.9% year-over-year to $114.49 million. The company deployed 109 MW, up 39.7% from the prior quarter. EPS increased 21.7% year-over-year to $0.28.

Analysts expect RUN’s revenue to increase 26.3% for the quarter ended December 31, 2020, 58.3% for the quarter ending March 2021, and 54.4% in 2021. The company’s EPS is expected to increase 130.4% for the quarter ending March 31, 2021, 330% in 2021, and at a rate of 20.5% per annum over the next five years. The stock has gained 398.4% over the past year to close Friday’s trading session at $84.62.

In November, RUN announced four environmental justice initiatives to expand access to solar and its benefits. The company also signed a Virtual Power Plant Agreement with Southern California Edison (SCE) to increase grid resilience and lower power costs.

It is no surprise that RUN is rated “Buy” in our POWR Ratings system, with an “A” for Trade Grade, and a “B” for Peer Grade. In the 17-stock Solar industry, it is ranked #6.

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IBDRY shares were trading at $57.17 per share on Wednesday afternoon, down $0.36 (-0.63%). Year-to-date, IBDRY has gained 0.47%, versus a 2.65% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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