When anyone hears the phrase “renewable energy,” the immediate thought tends to be solar. As our world continues to embrace renewable energy sources more and more, solar and wind energy have risen to become the most iconic figureheads. Already, the renewable energy market is valued at about $1 trillion and shows no signs of stopping. A large reason for this tremendous growth can be attributed to the increasing affordability of long-term cheap, renewable energy. For example, solar energy is already reaching low costs of around $30 to $50 per MWh, as opposed to grid electricity still at about $150 to $160 per MWh.
While concerns about the initial costs of solar energy and the anxiety of unfamiliar fuel sources still remain daunting to many consumers, countless companies have already begun creating innovative solutions to help consumers more easily integrate into renewable energy. Especially with the mounting importance that investors have had on environmental, social and governance (ESG) issues, it becomes imperative to understand the companies that will spearhead the next line of success. While large giants like Tesla (NASDAQ:TSLA) and NextEra Energy (NYSE:NEE) have begun paving the way in renewable energy, in this article, we wanted to highlight three more hidden gems with the potential to be the next dominant leader in the solar energy space.
Enphase Energy (ENPH)
Enphase Energy (NASDAQ:ENPH) is the world’s leading supplier of game-changing micro-inverter technology. With 765 patents globally and a customer base across over 145 different countries, Enphase Energy finds itself ahead of the competition in solar innovation. In fact, Yahoo Finance analysts estimate it will trade around at a one-year price average of $116.09.
Recently, on November 16, 2023, Enphase released its highly anticipated latest microinverter — the IQ8 that will shake up the solar industry. Coupled with a recent 66% year-over-year (YOY) growth in the solar industry, Enphase will no doubt be able to rebound from its recent downturn.
Speaking of its downturn, Emphasis’s recent struggle with missed sales and profit targets has placed it at an unusually attractive price point. Currently, ENPH’s PE ratio is 77%, down from its five-year average of 99.71x to 23.41x, also falling far below the overall renewables industry’s average of 83.8x. While earnings aren’t looking too sunny just yet, I have no doubt ENPH’s innovative product lineup will allow it to explode back to a dominant lead in the coming years.
First Solar (FSLR)
First Solar (NASDAQ:FSLR) is one of the leading providers of solar panels and utility-scale power scales as the company continues to pave the next generation of solar technology. Yahoo Finance analysts estimate it will trade within a one-year price range of $157.56 to $326, averaging at around $232.34.
Taking a look at First Solar’s financials and valuations, its current YoY revenue growth stands at 25.28%, a whopping 400% increase when compared to its five-year average of 5.06%. While the company might not be undervalued at the moment, its large profitability margins make up for it. First Solar’s gross profit margin of 27.17% TTM is about a 44% increase from its 5-year average of 18.92%.
Along with this, President Joe Biden’s plan of increasing solar energy generation from 3% in 2020 to 45% by 2050, paired with decreasing costs and supportive policies like tax incentives, will only continue to boost solar industry growth.
From First Solar’s shift to the more profitable solar modules market to its innovative and advantageous thin film CadTel PV semiconductor, First Solar will be a great addition to any investor looking for new solar stock.
Altus Power (AMPS)
Altus Power (NYSE:AMPS) is a prominent player in the energy sector, contributing to the shift to solar energy through managing commercial and community-wide solar facilities.
Altus Power just recently revealed its new Atlus IQ, an AI-powered cloud-based tool that gives insights on energy usage and generates solar savings. From real-time monitoring and solutions to comprehensive reports and seamless portfolio integration, Atlus IQ will only accelerate Atlus Power’s growth.
In terms of Altus Power’s financials, its YoY revenue growth is at an outstanding 53.93%, widely above its sector median of 6.89%. Even though the company is likely not undervalued currently, due to its recent influx of growth, the company’s absurd profitability margins still set it as an attractive investment. With a TTM EBITDA margin of 52.97% and gross margins at 82.35%, Atlus will no doubt have the free cash to continue pouring into R&D and capital investments. With overall AI trends supercharging this cheap energy company, I have full confidence that Atlus will be able to grow into the next unstoppable force in the solar energy sector.
On the date of publication, Ian Hartana and Vayun Chugh 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.