5 Greentech Stocks to Watch for ESG Investing

Environmentally friendly companies with attractive stock fundamentals

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The renewable energy sector is growing rapidly, as U.S. President Joe Biden continues to push for green energy policies. Meanwhile, oil prices have surged due to worldwide tensions, causing more people to investigate alternative energy sources such as solar.

What's more, we have seen a surge of ESG (Environmental, Social, and Governance) investing, with traders considering these non-financial factors when determining which stocks to add to their portfolios. If you are interested in investing in this rapidly growing sector, consider researching these following greentech stocks:

1. First Solar

First Solar, Inc. (NASDAQ:FSLR) makes thin-film solar panels. This type of solar panel is advantageous because it is cheap, uses less material, and is lightweight. Since thin-film solar panels are much larger than crystalline solar panels, they are best for large spaces, making First Solar’s technology ideal for utility-scale energy projects.

First Solar is fundamentally decent, given its strong balance sheet. Its assets outweigh its equities, and the company has enough cash to cover all of its debt. This is important because First Solar is not free cash flow positive, meaning it does not have any leftover cash to return to shareholders with a dividend.

However, the company produces a positive operating cash flow, meaning its business operations are doing well. Free cash flow includes capital expenditure expenses, which means the company is reinvesting its cash. While this may not look great in the short-term, in the long run these investments should pay off.

2. Plug Power

Plug Power Inc (NASDAQ:PLUG) develops hydrogen fuel cell systems. Hydrogen fuel cells are a different type of battery than the lithium-based batteries electric vehicles use. They can store much more energy than a similar-sized lithium-ion battery, which means hydrogen fuel cells offer a range advantage, while also occupying less space.

The company doesn't look great on paper, but it does have a promising balance sheet. Otherwise, Plug Power is not producing much revenue, and has not been profitable for the last few years. Cash flow is also negative, but PLUG still has enough cash to cover its debts, which will keep it afloat until it starts turning a profit.

3. Enphase Energy

Enphase Energy Inc (NASDAQ:ENPH) specializes in designing and manufacturing solar energy systems for both homes and businesses. The Enphase system reduces utility bills, and can keep power on when weather conditions take a turn. The company pioneered the concept of a microinverter, which allows power to stay on during grid outages. Plus, the Enphase IQ battery can store solar power to be used anytime.

Enphase's market cap is just $25 billion, and the company is trading at a price/earnings ratio of 117.16. Its stock price has risen over 15,000% over in past five years, due to the company's amazing fundamentals. While its price/earnings ratio is high, revenue growth is through the roof. The company is consistently beating on earnings, and as the world continues to utilize green energy, ENPH should continue to do well.

4. NextEra Energy

In terms of market capitalization, NextEra Energy Inc (NYSE:NEE) is the largest electric utility holding name. Its subsidiaries include Florida Power & Light, NextEra Energy Resources, NextEra Energy Partners, Gulf Power Company, as well as NextEra Energy Services. These companies currently generate the largest amount of renewable energy from the wind and sun, and also generate electricity through nuclear, coal, and natural gas facilities, which is sold to retail and wholesale companies.

NextEra Energy has a sizable market cap of $162 billion, and trades at a price/earnings ratio of about 91. While the company generates consistent revenue, its growth has not been prevalent in the past few years. What's more, the company has more debt than cash to pay off, but it uses its positive operating cash flow to hack away at its debt.

Specifically, the energy concern spends essentially all its profits on capital expenditures and paying off its debt, which is a good sign of healthy money management. It is also a dividend aristocrat, having increased its dividend for over 25 years, proving it strives to provide value to shareholders.

5. Clearway Energy

Clearway Energy Inc (NYSE:CWEN) and its subsidiaries specialize in the renewable energy business in America, providing electricity to more than 3 million retail customers, who are primarily located in the Northeastern United States. The company is one of the largest renewable energy owners, and sells its power via Power Purchase Agreements (PPAs), which provide steady revenue for the company.

Clearway Energy’s revenue is not growing at an alarming rate, but it is reliable, and has shown moderate growth. The company is trading at a price/earnings ratio of 69.9, which shows investors that the company is not a value play, and has additional room to grow.

In addition, its operating cash flow continues to increase each year, allowing Clearway Energy to pay off its debt, and invest in capital expenditures to expand. Even with the repayment of debt and reinvestment, its free cash flow remains positive, allowing it to pay out a dividend yield to its shareholders.

 




 
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