Renewable energy is expected to generate almost all of the world’s electricity growth between now and 2025, an analysis of data from the International Energy Agency indicates. Moreover, by that year, renewables are on track to become the world’s largest source of electricity. As a result, it’s definitely a good idea for long-term investors to buy the stocks of renewable energy company winners.
Also noteworthy is that the IEA expects global electricity demand growth to jump significantly starting this year. Given the proliferation of electric vehicles, data centers, and green hydrogen, that certainly makes sense. So not only will renewables account for almost all electricity growth between now and 2025, but that growth is expected to greatly accelerate starting this year.
Are you starting to see now why I’m so excited about finding the best renewable energy companies for long-term growth investors? Here are seven names that are in that category.
Shoals (SHLS)
Shoals (NASDAQ:SHLS) develops equipment for solar projects that save solar developers money. As I reported in a recent column, the company recently reported very strong first-quarter results.
Indeed, CEO Jeffrey Tolnar noted on the company’s Q1 earnings call that SHLS had ” set new records for revenue, growth profit, adjusted EBITDA, and adjusted net income” last quarter. And the company expects its top line to reach another record during the current quarter.
For the full year, SHLS expects its top line to surge an impressive 47%-56% year-over-year, while it predicts that its adjusted EBITDA will reach $145 million to $160 million and its adjusted net income will climb to $92 million to $102 million.
SHLS stock is changing hands for 41 times the midpoint of its adjusted 2023 net income guidance. Given the company’s incredible growth, that’s a low valuation.
The Street was pleased with the company’s results, as the shares gained 16% between May 8, the day that the results were announced, and May 11.
Maxeon (MAXN)
Like Shoals, Chinese solar panel maker Maxeon (NASDAQ:MAXN) reported very strong Q1 results that greatly pleased large investors.
In Maxeon’s case, the company reported a surprise profit, as it generated Q1 earnings per share of 46 cents, a very impressive $1.02 above analysts’ mean estimate. The company’s revenue surged 43% year-over-year to $318.3 million, which was $9.8 million below analysts’ average estimate.
For the current year, the company expects its top line to come in at $1.4 billion to $1.6 billion. At the midpoint of the range, that’s slightly above the analysts’ mean outlook of $1.48 billion. And in 2023, the company expects to generate EBITDA, excluding certain items, of $95 million to $120 million, up from its previous outlook of $80 million to $100 million.
Maxeon has a great deal of exposure to the EU’s rooftop solar market, which is growing tremendously. The company noted that its rooftop solar business “was led once again in volume, revenue and gross margin dollars by our European team and our unique direct-to-installer channel in that region.”
And in the U.S., the company’s rooftop solar business is boosted by its partnership with SunPower (NASDAQ:SPWR), one of the largest installers of residential solar panels in the country.
Plug Power (PLUG)
Plug Power (NASDAQ:PLUG) is becoming one of the world’s leading producers of green hydrogen, which is produced using renewable energy.
PLUG stock has fallen out of favor with the Street in recent months because of its current negative margins as it ramps up production of green hydrogen. But the company has a huge opportunity to become a major supplier of fuel for planes.
On May 11, CNBC reported that Airbus (OTCMKTS:EADSY), one of the world’s two major airplane makers, is intensifying its efforts to develop hydrogen-fueled planes. In fact, the company plans to “test a hydrogen engine on “ a plane in three years, CNBC noted.
PLUG is partnering with Airbus on the development of hydrogen planes.
Analysts, on average, expect the company’s revenue to surge to $1.3 billion this year from $700 million last year. The company says that its margins will surge as it brings many more green hydrogen plants online.
Orsted (DNNGY)
Orsted (OTCMKTS:DNNGY) is a Danish company that owns and operates wind energy projects. Despite the current high-inflation environment that has negatively affected many companies in the wind-energy sector, Orsted, which specializes in offshore wind-energy systems, managed to report first-quarter results that were impressive in many respects. Orsted also operates some solar plants.
Specifically, the company reported, in preliminary Q1 results, that its profit from its “wind and solar assets in operation” climbed 2.2 billion Danish krones versus the same period a year earlier to 6.9 billion Danish krones. (One U.S. dollar is equivalent to 6.8 Danish krones).
Moreover, the company’s cash flow from operating activities soared to 10.1 billion krones last quarter, up from a small loss of 37 million krones in Q1 of 2022.
Impressively, Orsted is expanding to Asia, as it’s developing a large 920-megawatt project in Taiwan. The company is also a first mover in the nascent U.S. offshore wind energy sector, as it bid for an 884-megawatt proposed project off the shore of Rhode Island. In the rapidly growing U.S. onshore wind sector, Orsted agreed to provide 150-megawatts of power to Google from a 268-megawatt project that it’s developing.
Orsted expects to generate EBITDA of 20 billion to 30 billion krones this year, and the company is well-positioned to benefit from huge, planned expansions of European and U.S. offshore wind energy in the coming years.
Vestas (VWDRY)
Denmark-based Vestas (OTCMKTS:VWDRY) is one of the world’s largest producers of wind turbines. The company is clearly benefiting from large increases in the demand for its turbines, along with easing inflationary pressures and better-performing supply chains.
Last quarter, its revenue jumped 14% year-over-year to 2.8 billion euros, while its EBIT climbed to 40 million euros, versus a loss of 329 million euros during the same period a year earlier.
Vestas noted that it’s still being significantly negatively impacted by high inflation. As these cost pressures ease in the medium and longer term, the company’s financial results should meaningfully improve.
Vestas noted that its orders jumped 12% YOY in Q1, and it says that it has the largest market share of any turbine maker in both the offshore and onshore sectors.
The company’s trailing price-sales ratio of 1.66 times is quite attractive.
Brookfield Renewable Partners (BEP)
Brookfield Renewable Partners (NYSE:BEP) owns renewable energy projects in many countries. As a result, the company is very well-positioned to benefit from the large, coming increases in the global demand for electricity in general and for electricity from renewable sources in particular.
Indeed, BEP already appears to be benefiting from these trends. In Q1, its revenue climbed 16.7% year-over-year, while its funds from operations per unit jumped 13% year-over-year to $275 million.
“The results reflect robust hydro generation across our portfolio, strong realized power pricing and asset availability, and contributions from growth,” BEP explained in a statement.
BEP expects the projects that it will launch this year to boost its FFO by a net total of $70 million.
NextEra Energy (NEE)
Like Brookfield Renewable, NextEra (NYSE:NEE) focuses on operating renewable projects and is well-positioned to benefit from the strong demand for electricity going forward.
Since NEE’s projects are all in the U.S., the company is going to be boosted a great deal by the large tax breaks for renewable projects that went into effect this year.
NEE is likely already benefiting from the latter positive catalyst, as its revenue soared 132% year-over-year last quarter to $6.2 billion, coming in $1.5 billion over analysts’ average estimate. Meanwhile, its EPS, excluding certain items, came in at 84 cents, 11 cents above the mean estimate.
NEE is changing hands at an attractive price-earnings ratio of 22.8 times and has a significant dividend yield of 2.4%.
As of the date of publication, Larry Ramer owned shares of PLUG,SHLS, and MAXN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.