The International Renewable Energy Agency reported that renewable energy capacity increased by about 10% globally in 2022. According to the IRENA organization, which also reported a 9.6% growth in renewable energy capacity globally, 83% of new power generation capacity last year came from renewable sources.
Given this backdrop, let us explore some renewable energy stocks, Enphase Energy, Inc. (ENPH) and Canadian Solar Inc. (CSIQ), which show strong growth potential.
The Biden administration plans to phase out fossil fuels as a source of energy in the United States by 2035. The White House established a goal of generating 80% renewable energy by 2030 and 100% carbon-free electricity five years later. These initiatives should benefit ENPH and CSIQ.
The alternative energy market is expected to increase at an 11.9% CAGR to $1.85 trillion in 2029.
Let’s discuss the stocks mentioned above in detail.
Enphase Energy, Inc. (ENPH)
ENPH designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry in the United States and globally through its subsidiaries.
ENPH’s trailing-12-month ROTA of 12.88% is significantly higher than the industry average of 0.66%. Its trailing-12-month asset turnover ratio of 0.90x is 48.5% higher than the industry average of 0.61x.
FDX’s non-GAAP revenue increased 75.6% year-over-year to $724.65 million in the fiscal fourth quarter, which ended February 28, 2023. The company’s non-GAAP operating income increased 134.7% year-over-year to $229.39 billion, while non-GAAP net income increased 106.6% year-over-year to $212.39 million. Its non-GAAP EPS came in at $1.51, up 106.8% year-over-year.
ENPH’s revenue grew at a CAGR of 55.1% over the past three years. In addition, its EBITDA grew at a CAGR of 61.6% over the past three years.
Analysts expect ENPH’s revenue to increase 36.4% year-over-year to $3.18 billion in 2023. Its EPS is expected to grow 20.1% year-over-year to $5.55 in 2023. It has surpassed EPS estimate in all four trailing quarters.
ENPH’s shares have gained 14.7% over the past year to close the last trading session at $221.37.
ENPH’s POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ENPH has an A grade for Growth and Quality. Within the Solar industry, it is ranked #2 out of 17 stocks. Click here for the additional POWR Ratings for Sentiment, Value, Momentum, and Stability for ENPH.
Canadian Solar Inc. (CSIQ)
CSIQ, based in West Guelph, Canada, designs, develops, manufactures, and sells solar ingots, wafers, cells, modules, and other solar power products. The company operates through two segments: Module and System Solutions (MSS); and Energy.
On April 11, 2023, CSIQ announced capacity development plans for CSI Solar Co., Ltd. in 2024. It plans to add 30 GW of ingot capacity, 15 GW of wafer capacity, 10 GW of cell capacity, and 25 GW of module capacity.
According to Dr. Shawn Qu, Chairman and CEO of CSIQ, the additions will be in the latest N-type technology, allowing the company to better satisfy high market demand and accelerate expansion.
CSIQ’s trailing-12-month ROTC of 4.20% is 113% higher than the industry average of 1.97%. Its trailing-12-month ROTA of 2.66% is 301.6% higher than the industry average of 0.66%.
For the fiscal fourth quarter that ended December 31, 2022, CSIQ’s net revenues stood at $1.97 billion, representing an increase of 29% year-over-year. Its gross profit increased 15.7% year-over-year to $348.63 million. Also, its income from operations for the same quarter increased 101.4% from the year-ago quarter to $135.76 million.
CSIQ’s revenue grew at a CAGR of 32.6% over the past three years. In addition, its EBITDA grew at a CAGR of 15.1% over the past three years.
CSIQ’s revenue is expected to increase 22.9% year-over-year to $9.18 billion in 2023. Its EPS is expected to grow 38.3% year-over-year to $4.76 in 2023. It surpassed the EPS estimates in all four the trailing quarters. The stock gained 30.4% over six months to close the last trading session at $39.67.
CSIQ’s POWR Ratings reflect this positive outlook. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
In addition, CSIQ has an A grade for Value and a B for Growth. It is ranked first in the same industry. Click here to see CSIQ rating for Momentum, Stability, Sentiment, and Quality.
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ENPH shares were trading at $223.18 per share on Thursday afternoon, down $1.09 (-0.49%). Year-to-date, ENPH has declined -15.77%, versus a 8.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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