Do Value Plays Still Exist In The Hot Alternative Energy Sector?

Alternative energy, which is defined as solar, wind, biofuels and other energy that is not fossil fuels, is hot right. But now that alternative energy has become a glamour sector, and investors have piled in, many of the companies have seen their shares rise sharply.

Some of the solar stocks, for instance, as the stocks have moved higher, are now trading with sky high price-to-earnings ratios.

First Solar Inc. (FSLR), for example, is a fast growing solar company, where analysts expect year-over-year earnings growth of 138.90%. It’s also a Zacks #1 Rank (Strong Buy) stock. But the stock is far from a value pick, as it trades at a whopping 47.9x forward earnings.

Are there any alternative energy companies with the same strong fundamentals as First Solar, but that are trading at a discount to the sector?

Believe it or not, value does exist. Even with the big run-up in the sector, I still found three alternative energy companies with value fundamentals which are also Zacks Rank #1 or #2 stocks.

Three Stocks with Strong Value Fundamentals

ReneSola, Ltd (SOL) is a Chinese solar wafer manufacturer. It is a Zacks #1 Rank (Strong Buy) stock. The company has beaten Wall Street estimates 2 out of the last 4 quarters by an average of 19.63%.

It also has strong value fundamentals. Its forward P/E is 9.62 and its price-to-book (P/B) is 2.32.

Gushan Environmental Energy Ltd. (GU) is a Chinese producer of biodiesel and related products. It is also a Zacks #1 Rank (Strong Buy) stock. The company has surprised on estimates the last 2 quarters by an average of 5.28%.

GU has solid value characteristics. It trades at 9.4x forward earnings and has a P/B of 2.57.

Aventine Renewable Energy, Inc. (AVR) is an Illinois-based producer of ethanol and related by-products. It is a Zacks #2 Rank (Buy) stock. It has beaten Wall Street estimates 3 out of the last 4 quarters by 288.89%.

AVR, like the other two companies, also has solid value fundamentals. It trades at 13.4x forward earnings and its P/B is only 0.79.

It Pays To Look Around

You may have to dig a little deeper to find value stocks in the alternative energy sector. A good resource to begin your search, which I used to find some of the companies in this article, is the Zacks #1 Rank list which will give you ideas in the sector and then you can expand your search from there.

Value exists even in the glamour investing sectors like alternative energy. It’s just not always staring you right in the face.

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