VST - 3 Clean Energy Stocks to Buy as Gas Prices Rise

2023-08-25 06:00:32 ET

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

Amid rising gas prices, there’s another way to mitigate the damage aside from acquiring shares of hydrocarbon businesses. That involves clean energy stocks to buy. While we’re hearing talk about the Federal Reserve achieving some success in sparking a disinflationary framework, the pain at the pump represents a new distraction.

According to USA Today , a combination of a slowdown at refineries , record heat waves, and impacts from hurricanes has contributed to rising gas prices. What’s more, the elevated fuel costs may hamper Labor Day weekend plans, along with fanning inflationary pressures again. With few viable options available, investors may want to hedge their portfolios with clean energy stocks to buy.

Vistra (VST)

An integrated retail electricity and power generation firm, Vistra (NYSE: VST ) is the largest competitive power generator in the U.S., per its public profile . Specifically, the company features a capacity of approximately 39 gigawatts (GW) powered by a diverse portfolio. This includes solar and battery energy storage facilities in addition to traditional energy sources such as natural gas and nuclear fuel.

Financially, Vistra presents a mixed case. For example, it could use a little shoring up of its balance sheet, particularly its low cash-to-debt ratio of 0.05x. Also, its three-year revenue growth rate (per-share basis) of 11.2% is right at the median for the utilities industry.

Still, VST trades at a forward earnings multiple of 9.7x , lower than the sector median of 15.97x. As well, it features a strong return on equity (ROE) of 30.21% over the trailing one-year period.

Finally, analysts peg VST as a unanimous strong buy among five expert voices. In addition, their average price target lands at $35.20, implying 16% upside potential. Thus, it makes a solid case for clean energy stocks to buy.

Ormat Technologies (ORA)

Based in Reno, Nevada, Ormat Technologies (NYSE: ORA ) is an international firm focused on supplying alternative and renewable geothermal energy technology. According to the Energy Information Administration (EIA), geothermal energy is exactly what it sounds like – heat within the earth . Better yet, it’s a renewable source because our planet continuously produces heat. Thus, tapping into this practically unlimited power may yield significant rewards.

For the time being, however, the market is having trouble accepting ORA. Since the start of the year, shares tumbled about 10%. In the trailing one-year period, they’re down almost 20%. To be sure, ORA presents a higher risk because of its forward multiple of 36.4x, which runs significantly higher than the sector median of 15.97x.

Still, experts believe the geothermal energy market may grow from $59.4 billion in 2021 to $95.82 billion by 2029. Amid rising gas prices and other headwinds, Ormat may see increased demand over the next several years.

Presently, analysts peg ORA as a moderate buy with an average price target of $90.25, implying a nearly 18% upside.

Northland Power (NPIFF)

One of the riskiest ideas for clean energy stocks to buy, Northland Power (OTCMKTS: NPIFF ) is a power producer that was founded in 1987 and publicly traded since 1997. Per its corporate profile , Northland develops, builds, owns, and operates clean and green energy infrastructure assets in Asia, Europe, Latin America, North America, and other selected global jurisdictions.

While contextually intriguing, Wall Street has a different idea about Northland. Since the start of this year, NPIFF has given up more than 30% of its equity value. In the past 365 days, shares stumbled over 45%. Still, in the trailing five years, NPIFF gained almost 11%. So, the speculation may be that the company finally hit rock bottom. From here, it might only be clear skies ahead.

Financially, Northland seems like an overall middle-of-the-road enterprise. However, it’s consistently profitable, featuring a trailing-year net margin of 18.98%. Lastly, analysts peg NPIFF as a unanimous strong buy among nine experts. Their average price target stands at $27.04, implying 41% upside potential.

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 .

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