Founded in 1996, Renewable Energy Group, Inc. (REGI) is an international producer of cleaner fuels and North America’s largest producer of biodiesel. The company’s segments include Biomass-based diesel, Services, Renewable Chemicals and Corporate and other activities. REGI’s products are alternatives to petroleum diesel and produce significantly lower carbon emissions.
The company has exhibited business resiliency of late and its revenue increased sequentially during the third quarter (ended September 30, 2020). Also, REGI’s sale of self-produced biodiesel increased by six million gallons in the third quarter.
In October, REGI announced plans to expand the capacity of its Geismar, Louisiana biorefinery by 250 million gallons annually to 340 million gallons annually. Construction is expected to begin in mid to late 2021, with a target completion date of late 2023.
REGI’s stock has gained 256.1% over the past year. Also, on a year-to-date basis, REGI has gained 31.5% to close yesterday’s trading session at $93.09. This impressive performance and potential upside based on several factors have helped the stock earn a Buy rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates REGI:
Trade Grade: A
REGI is currently trading significantly above its 50-day and 200-day moving averages of $80.44 and $54.52, respectively, indicating an uptrend. Moreover, REGI has gained 25.6% over the past month, reflecting solid short-term bullishness.
For the third quarter ended September 30, 2020, the company’s total revenues have increased 5.5% sequentially to $576.05 million. Its gross profit has increased 222.5% year-over-year to $77.65 million. REGI sold 176 million gallons of fuel in the third quarter and produced an aggregate 137 million gallons of biodiesel and renewable diesel. The company reported net income of $26.80 million, yielding EPS of $0.60. This compares to net losses reported in the third quarter of 2019.
It was announced on December 9, 2020, that the City of Ames is adding seven new all-purpose dump trucks to their fleet in which the Optimus Technologies advanced fuel system will be integrated. The Optimus system enables engines to operate year-round on 100% biodiesel produced by REGI.
In December, REGI announced several changes to the organizational construct of its senior leadership team, including the transition of Chad Stone from the CFO position into a newly created role of Senior Vice President, Commercial Performance.
Buy & Hold Grade: C
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, REGI’s positioning indicates a moderate uptrend. The stock is currently trading 15.4% below its 52-week high of $109.98, which it hit on January 25.
The company’s net revenue grew at a CAGR of 6.9% over the past three years, while its EBITDA increased at a CAGR of 114% over the same period. This can be attributed to the company’s continued strategic expansion.
Peer Grade: A
REGI is currently ranked #5 of 54 stocks in the Energy – Services industry. Other popular stocks in the energy – services group are Sunnova Energy International Inc. (NOVA), New Fortress Energy LLC (NFE) and Helix Energy Solutions Group, Inc. (HLX).
With a 256.1% gain, REGI has comfortably beaten the returns of these popular industry participants over the past year. NOVA and NFE have gained 224.2% and 189.9%, respectively, while HLX has lost 50.5%, over the same period.
Industry Rank: D
The Energy – Services industry is ranked #112 of the 123 StockNews.com industries. Companies in this industry supply oilfield services, products, technology, and systems to the oil and natural gas industry worldwide.
With concern about climate change growing worldwide, governments are taking measures to transition the economies to be renewable energy driven and sustainable. As a result, companies in this industry have been witnessing a slowing of demand for their products and services. However, companies that can adapt to the changing needs are expected to be able to sustain themselves in the long run.
Overall POWR Rating: B (Buy)
REGI is rated Buy due to its short-term bullishness and solid growth prospects as determined by the four components of our overall POWR Rating.
We think REGI has the potential to rally in the coming months despite gaining 31.5% so far this year, based on its continued business growth, favorable earnings and revenue outlook, and strong financials.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for REGI. It has an average broker rating of 1.44, indicating a favorable analyst sentiment. Of 8 Wall Street analysts that rated the stock, 1 rated it Strong Buy and 7 rated it Buy.
A consensus revenue estimate of $2.44 billion for 2021 indicates a 15.4% increase year-over-year. Moreover, REGI’s earnings surprise history looks impressive, with the company missing the consensus estimate in just one of the trailing four quarters. Its EPS is expected to grow 63.6% in 2021.
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REGI shares were trading at $89.20 per share on Friday afternoon, down $3.89 (-4.18%). Year-to-date, REGI has gained 25.95%, versus a -1.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More…
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