According to the IEA, investments in clean energy have increased by 40% since 2020. Furthermore, this growth could still increase as government bodies push legislation that will help meet these climate goals and super this capital-intensive industry. That opens up opportunities for investors to ride the growth in this sector.
To come up with the list of renewable energy stocks to buy, I screened for the criteria:
- Companies operating in the renewable energy space
- Low annual debt-to-EBITDA ratio
- Revenue growth of at least 10%
I looked for low debt-to-EBITDA companies to focus only on those with a good chance to thrive in this capital-intensive industry. Debt-to-EBITDA measures a company’s ability to pay off its incurred debt before taxes and other expenses are accounted for.
So, here are three top renewable energy companies to buy based on the above screen.
Nextracker (NXT)
Nextracker (NASDAQ:NXT) creates solar trackers and software solutions, famous for being the best in the industry. The solar tracker’s ability to follow the sun’s movements allows the full optimization of solar energy generation.
The company recently announced its new flagship solution, NX Horizon. The low-carbon tracker solution offers a 35% lower carbon footprint, marking a significant milestone for solar energy.
The company’s Q3’24 ended with $710.4 million in revenue, up 38% year-over-year (YOY), and adjusted EBITDA soared 168% over the same period. In addition, gross profits hit $209.7 million, highlighting its continued strength.
Nextracker expects GAAP net income to reach between $374 million and $429 million and revenue to be between $2.425 billion and $2.475 billion. The debt-to-EBITDA ratio stands at 0.41, emphasizing its strong capability to pay off its incurred debt even with a slowdown in the market.
First Solar (FSLR)
Solar energy is one of the top choices for alternative energy sources to date, and First Solar (NASDAQ:FSLR) has been reaping the benefits of its growth. The company is one of the top photovoltaic cell (PV) producers, which allows solar companies to transform sunlight into electricity, making IT an integral part of transforming the green economy.
The growing demand for solar has led to the acquisition of the Ohio facility and the conversion of the distribution center into a key addition to increase its manufacturing capability.
First Solar’s Q1’24 saw an excellent 45% YOY improvement in net sales. Meanwhile, EPS ended at $2.21, improving from 40 cents in the same period last year and recording a 452% growth.
The debt-to-EBITDA ratio stands at 0.42, highlighting its strong financial position. So, if you want to take a pick from renewable energy stocks, FSLR might be one of your best bets to buy.
Broadwind (BWEN)
The ongoing transition to clean energy has boosted the solar power industry, wind power and renewable energy companies like Broadwind (NASDAQ:BWEN). Broadwind produces and sells clean tech, infrastructure and wind energy equipment components.
According to its latest financials, the company’s proprietary Pressure Reducing System technology is seeing growing market demand, highlighting its products’ growing impact in the clean energy industry.
The increased demand is evident in its FY’23 numbers, with revenue growing 15.1% YOY. Earnings also made a turnaround, a profit of 36 cents, a 175% improvement from last year’s 48 cents in the previous year. ’23 numbers, as revenue grew 15.1% YOY, reaching $203.5 million compared to last year’s revenue of $176.7 million. Earnings made a turnaround profit of 36 cents, a 175% improvement from last year’s 48-cent loss.
Broadwind’s debt-to-EBITDA currently stands at 2. Though it’s higher than the other renewable energy stocks on the list, Broadwind is still in its growing phase. Plus, it is still below the relative accepted debt-to-EBITDA ratio of 3.
Furthermore, its impressive and consistent growth suggests that good things are yet to come for the company. So, those who want to get on the ground floor of renewable energy stocks might want to consider Broadwind for their portfolio.
On the date of publication, Rick Orford did not hold (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.
Rick Orford is a Wall Street Journal best-selling author, investor, influencer, and mentor. His work has appeared in the most authoritative publications, including Good Morning America, Washington Post, Yahoo Finance, MSN, Business Insider, NBC, FOX, CBS, and ABC News.