Renewable Energy Group: Safe Energy Stock Bound To Gain Big (NASDAQ:REGI)

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Renewable Energy Group, Inc. (NASDAQ:REGI) is a stock with robust financial fundamentals, indicating high growth, high-profit capability as well as a substantially lower level of risk, in comparison to similar energy stocks. I believe any investor looking to enhance the value of their overall portfolios would be wise to buy this stock, which has defied all odds and will likely be a gamechanger as the world continues its transition towards clean energy stocks. There is a clear indication, as will be discussed below, that the market shares in on this optimism towards the REGI stock.

Company Overview

Renewable Energy Group is a US-based Fortune 1000 company that specializes in the biodiesel sector, operating a feedstock processing facility along with 12 biorefineries across North America. The company’s biorefineries ensure high-quality outputs, making it a significant player in the global renewable biofuels domain. The REGI value chain consists of production systems as well as distribution and logistics networks that see the conversion of oils, greases, and natural fats into various forms of advanced biofuels. REGI’s mission is to ensure a shift towards sustainable energy by providing a robust alternative to fossil fuel usage and minimizing the global carbon footprint across industries. With the last decade seeing a broader social and political shift towards decarbonization awareness, large companies such as Renewable Energy Group have been poised as the next-generation pioneers to lead the world towards new and sustainable energy dynamics.

REGI Price Movements

From 2017 to early 2021, REGI had ballooned up in price from being a $10 stock to one trading at almost $110 per share. This rise of nearly 1000% indicates the long-term prospects the stock holds for those seeking value addition, whilst gaining exposure to a sustainable industry.

February 2021 brought a brief plummet to the REGI stock price, as the company’s operations in Texas were adversely impacted by cold storms owing to polar vortex winds. With the Texas main energy grid coming to a halt, renewable stocks took a dip, with REGI falling 20% during this period. With the shutdown of wind power facilities across the state, REGI had been unable to maintain regular levels of capacity, temporarily impacting profitability.

With the Texas power grid resuming functionality following the end of the winter storms, REGI stock saw stabilization once again, with its fall being largely limited, and investors breathing a sigh of relief following its resume of steady growth. By February 2022, Moody’s placed the REGI stock under review for up-gradation of its credit rating. The move was met with much optimism across the market and resulted in a nearly 40% surge in the price of the stock.

The REGI gain from April 2017 to April 2022 amounts to 489.42%, which is almost a 98% gain on an annual basis. Gains of this proportion make the stock a clear favorite of investors looking for stable and persistent growth, despite macroeconomic shocks.

REGI Price chart

Finviz

Financial Performance 2021

The earnings report for the year-end 2021 was highly positive, and indicated growth, along with business sustainability for REGI. These results came much to the delight of investors, especially given that the record revenue figure of $3.2 billion had exceeded analysts’ expectations. Expectations for revenue had been impacted by the fall in 2020, as a result of the Covid-19 pandemic, which had seen a reduction in demand for renewable energy across industries, as had been confirmed by independent research carried out by S&P500.

REGI Annual Revenue

REGI Annual Revenue (Finviz)

Similarly, the net income saw a marked improvement following an adverse performance in 2020, as a result of the global recession following the Covid-19 outbreak, and related disruptions impacting the transition towards clean energy. This had been particularly well received by the market, as bears had previously anticipated these Covid-related impacts would be felt well into the long-term future and were eventually disproven. The bounce back in net profit indicates the resilience of the industry, and especially the profit-generating capability of the REGI stock.

REGI net income

REGI net income (Finviz)

Given the company’s rise in its net earnings, I believe this trend will continue to persist, with pre-Covid-19 level records being broken before 2023. The company’s business model, based on renewable energy sources, reduces its reliance on fossil fuel imports, which makes it a steady candidate for high growth, despite global shockwaves and disruptions.

Competitive Market and Fundamentals Analysis

Ticker

Company

Market Cap (Billions)

EPS (TTM)

Institutional Ownership

Short Ratio

Return on Assets

Quick Ratio

LT Debt/Equity

Price

Volume

REGI

Renewable Energy Group, Inc.

3.06

4.28

96.80%

1.34

9.20%

4.2

0.31

60.76

606,120

SUN

Sunoco LP

3.46

5.28

21.20%

3.83

8.00%

0.7

4.01

42.85

137,670

DINO

HF Sinclair Corporation

8.30

3.39

66.40%

2.72

4.40%

0.8

0.54

38.2

412,600

VVV

Valvoline Inc.

5.48

2.31

92.70%

3.54

13.60%

1.4

9.95

31.1

289,198

PBF

PBF Energy Inc.

2.99

1.85

77.40%

4.97

2.00%

0.7

2.27

26.24

421,704

CVI

CVR Energy, Inc.

2.52

0.25

94.50%

2.35

0.60%

0.8

2.99

26.01

96,100

Source: Finviz.com as at 4/12/2022

Comparing the REGI stock to similar-sized US-based energy stocks in the market, it can be seen that several positive indicators could spur market bulls to continue driving up the price into the long term.

REGI is amongst the top two EPS deliverers within the sector amongst comparable stocks. This comes despite having the highest price in the market as of 12 April 2022. An EPS figure of $4.28 per share is impressive, as it signals Renewable Energy Group as being a profitable company with a high level of earnings to distribute amongst its shareholders. Similarly, the company holds the most impressive level of institutional shareholding across comparable stocks, which points to the stock as being a relatively low-risk prospect with higher growth potential. Given the extensive risk parameters and evaluation models employed by institutional investment firms, investors holding REGI can be confident with the stock in their portfolio.

Additionally, REGI stands having the lowest degree of a short ratio, of 1.34. In comparison to similar energy stocks in the US, market participants assign REGI as having the lowest likelihood to enter into a decline phase. This figure indicates a high degree of optimism associated with REGI.

The long-term debt to equity ratio for REGI stands at the lowest amongst competing stocks, with a figure of 0.31. This exposes the company to a far lower degree of credit risk, eliminating the need for borrowing to finance its operations and growth. Similarly, the company’s quick ratio stands substantially higher than any competing firm, at 4.2, indicating its ability to pay off immediate obligations with relative ease. REGI has been improving on this financial metric throughout the years:

REGI Quick Ratio

REGI Quick Ratio (Macrotrends)

Remarks and Conclusion

REGI is a stock that holds all the relevant indicators that point towards long-term growth, and its profit-enhancing capabilities. Its earnings growth in 2021, despite the setback, felt throughout the energy sector, indicates its resilience, whilst enhancing the value of its shareholders. The reason, I believe, behind this impressive financial performance, lies both in the robust financial position of the company, coupled with the global transition toward clean energies. The Covid-19 phenomenon, despite the disruptions it brought to this transition, emphasized the need for energy sources that stand independent of global supply chain dependencies. The recent crisis between Ukraine and Russia further reinforces this view, with nations looking toward alternative energy sources.

Renewable Energy Group is a company that stands at the forefront of the oncoming dynamic shifts and stands well-positioned to become a global leader in this domain. There is a clear indication that the market shares in on this optimistic sentiment, as is indicated by figures reflecting its institutional ownership and short ratio. This confidence surrounding REGI is a result of a steadily rising EPS, a low level of credit risk, and its strong liquidity position. Looking at each of these factors holistically, it is evident that the REGI stock is a strong buy, and one likely to hold resilient into the long-term, despite broader disruptions.

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