Renewable Energy Group, Inc. (REGI) is a leading provider of low-carbon transportation fuels, operating through Biomass-Based Diesel, Services, and Corporate and Other segments. The company also sells petroleum-based heating oils and diesel fuels and operates fermentation facilities. It owns and operates a network of 13 biorefineries in the United States and Europe.
As the Biden administration prepares to embark on an ambitious climate agenda, the renewable energy industry is expected to benefit significantly. The U.S. President-elect has pledged to push a sweeping $2 trillion climate plan in his first term, along with an ambitious goal of completely decarbonizing the U.S. power mix by 2035.
REGI is well positioned to lead and capitalize on this opportunity. The company focuses on delivering value to its customers while expanding its margins.
REGI’s increasing production capacity and continued operational expansions have allowed it to gain 210.7% over the past year. This impressive performance, combined with several other factors, has helped REGI earn a “Strong Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates REGI:
Trade Grade: A
REGI is currently trading above its 50-day and 200-day moving averages of $59.51 and $37.55, respectively. This indicates that the stock is in an uptrend. Also, the stock has gained 54.9% over the past three months, reflecting solid short-term bullishness.
REGI’s sale of self-produced biodiesel increased by six million gallons year-over-year in the third quarter ended September 30, 2020. Its gross profit increased 225% from the year-ago value to $78 million over this period. This increase is primarily due to an increase in the company's European revenue.
REGI recently announced a plan to expand the production capacity of its Geismar Renewable Diesel Plant from 250 million gallons annually to 340 million gallons per year. The company is moving to ensure that it can deliver sustainable fuel solutions to meet its increasing customer demand.
On September 22, REGI’s wind turbine project broke ground. It will lower the company’s bio-refinery in Minnesota. This innovative approach will help the company to lower its carbon footprint and thereby strengthen its position in the clean energy industry.
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, REGI is well positioned. The stock is currently trading just 1.4% below its 52-week high of $78.59, which it hit on December 21t.
The company’s net revenue has grown at a CAGR of 6.9% over the past three years, while its EBITDA grew at a CAGR of 114% over this period. This growth can be attributed to the company's continued focus on improving its product mix and an increase in the sale of self-produced biodiesel.
Peer Grade: A
REGI is currently ranked #2 of 60 stocks in the Energy – Services industry. Other popular stocks in this industry are Clean Energy Fuels Corp. (CLNE), Mammoth Energy Services, Inc. (TUSK) and National Energy Services Reunited Corp. (NESR)
CLNE, TUSK, and NESR gained 166.4%, 154.5%, and 7%, respectively, over the past year. This compares with REGI’s 210.7% returns over this period.
Industry Rank: D
The Energy – Services industry is ranked #104 of 123 StockNews.com industries. The companies in this industry supply oilfield services, products, technology, and systems to the oil and natural gas industry worldwide.
The COVID-19 pandemic has exacerbated the collapse in oil and natural gas prices, including a brief period when prices were negative as new, abundant supply entered the market earlier this year. Moreover, drastic investment cuts coupled with delays in the delivery of offshore installations have scaled down the demand for products in this industry.
Overall POWR Rating: A (Strong Buy)
REGI is rated “Strong Buy” due to its impressive financials, short- and long-term bullishness, and solid price momentum, as determined by the four components of our overall POWR Rating.
Bottom Line
REGI is well-positioned to soar despite gaining 210.7% over the past year. The policies and economic stimulus measures expected from the Biden-Harris administration will likely be focused on renewable energy. Thus, REGI’s low carbon fuels should witness significant growth in demand in the future.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is impressive for REGI. It has an average broker rating of 1.44, indicating favorable analyst sentiment. The consensus EPS estimate of $5.01 for the next year represents a 65.3% improvement year-over-year. Moreover, REGI has an impressive earnings surprise history, with the company beating the EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $2.30 billion for the next year indicates a 9.6% increase from the same period last year.
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REGI shares were trading at $77.68 per share on Tuesday afternoon, up $0.16 (+0.21%). Year-to-date, REGI has gained 188.24%, versus a 15.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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