With the political and ideological winds pushing for increased sustainability, the concept of green stocks have jumped to the forefront. And don’t worry, this isn’t about tree hugging for its own sake (though you can do that if you wish). Rather, going the sustainable route can be quite profitable.
According to McKinsey & Company, a growing body of evidence indicates that go-green initiatives can help foster profits and business opportunities. It makes sense when you think about it. Again, sustainability isn’t just some whimsical concept about making sure to recycle (though that helps). Rather, by applying practical measures, companies can reduce operational costs through improved efficiencies and waste reduction.
Also, the global green technology and sustainability market should reach a valuation of $60.7 billion by 2027. That’s up from a value of $17.8 billion in 2022, demonstrating the power behind sustainable stocks. Plus, with more companies outbidding each other for sustainability kudos, it’s time to give this trend some thought.
On that encouraging note, below are green stocks to consider.
Lululemon Athletica (LULU)
Based in Canada, Lululemon Athletica (NASDAQ:LULU) ranks among the more popular athletic apparel retailers. As evidence, despite significant headwinds impacting the consumer economy, LULU performed spectacularly in 2023. Wall Street analysts have taken note, rating shares a consensus strong buy. Now, the average price target of $494.58 implies a loss. However, the latest target calls for shares hitting $550.
That might be more realistic given how much the company has resonated with its core audience. Even better, LULU ranks among the top green stocks. Primarily, one of the ways that it achieves a more sustainable business profile is through its manufacturing processes. Per its website, Lululemon innovates through the use of more sustainable materials. As well, it implements measures to limit water use.
Moreover, by 2025, the company aims to achieve at least 75% sustainable materials for its products. From a financial perspective, LULU isn’t offered at a discount. However, the company prints a massive three-year revenue growth rate of 27.8%. As well, it’s consistently profitable, making it one of the sustainable stocks to watch.
Ormat Technologies (ORA)
If you’re looking for relevant green stocks that bring great value to society, take a look at Ormat Technologies (NYSE:ORA). Specializing in geothermal energy generation, Ormat offers a compelling case for sustainability. Now, it suffered red ink in 2023, presenting a higher-risk profile. Nevertheless, analysts peg shares a consensus moderate buy with an $81.67 price target. The high-side target lands at $92.
For those with a higher-risk tolerance, ORA belongs on your list of must-watch sustainable stocks. As the underlying business model suggests, geothermal energy represents heat from within the earth. It’s very much a renewable energy source because said heat is constantly being produced. Along with usage in heating buildings, geothermal energy can also be applied for generating electricity.
According to MarketsandMarkets, the global geothermal energy sector could reach a valuation of $9.4 billion by 2027. In addition, Ormat specializes in recovered energy generation, converting waste heat from industrial processes into on-site power or power that can be sold to the wider grid.
NextEra Energy (NEE)
One of the biggest names in green stocks, NextEra Energy (NYSE:NEE) generates about 58 gigawatts (GW) of generating capacity per its public profile. It’s the world’s largest electric utility holding company by market capitalization. Additionally, the company owns vast wind and solar networks. Wall Street analysts expect a recovery after a rough outing in 2023, rating shares a moderate buy. The average price target comes in at $67.75.
Indeed, the tough economic backdrop of last year – marked by stubbornly elevated inflation and also high borrowing costs – hurt sentiment among many sustainable stocks. However, you can’t keep a great enterprise down for too long. Plus, NEE stakeholders have much to look forward to if expert projections have anything to say about it.
Per Grand View Research, the global renewable energy market reached a valuation of $1.21 trillion in 2023. By 2030, the segment could generate revenue of $3.6 trillion. If so, we’re talking about a compound annual growth rate (CAGR) of 17.2%. With such prospects, investors may want to consider the de-risked profile of NEE.
Kroger (KR)
At its core, Kroger (NYSE:KR) represents a publicly traded security that offers relevancy for myriad motifs. After all, no matter what’s going on in society or in the economy, we got to eat. Based on the trade-down effect, Kroger pretty much offers the lowest price you can acquire nutritional sustenance without grossly compromising your health. Unsurprisingly, analysts peg shares a moderate buy with a $51 average price target.
So, you might be asking, Kroger is relevant but is it one of the green stocks? I’d say that it is. As with many companies, Kroger features an environmental, social and governance (ESG) directive. Thanks to its myriad efforts in addressing climate impact, KR makes a solid argument as one of the sustainability stocks.
Further, you can see this for yourself at your local Kroger/Ralphs location. Through its Simple Truth plant-based in-store product brand, consumers can enjoy non-animal proteins that taste almost like the real thing. Plus, with the company’s greater scale, it’s often able to offer green goodies at a relatively low cost.
Microsoft (MSFT)
At first glance, technology juggernaut Microsoft (NASDAQ:MSFT) might not seem like an intuitive idea for green stocks. A relevant powerhouse dominating key sectors of the tech ecosystem? Yes, that’s not under question. But does it have a sustainability directive? Some might argue that within the tech space, it leads in various ESG initiatives. Therefore, if you want to profit and feel good doing so, MSFT could be your ticket.
Specifically, Microsoft is huge on advancing sustainability protocols and standards. According to its website, by 2030, the tech firm aims to be carbon negative, not just neutral. By 2050, it broadcasts an ambitious goal: to remove the company’s historical emissions since its founding in 1975. It’s not stopping there. By 2030, Microsoft will be water positive, replenishing more water than it uses. And by that time, it will also implement a zero-waste protocol.
Financially, due to the predictable and mature nature of the business, MSFT isn’t offered at a discount. However, you can arguably trust its robust long-term revenue growth and consistent annual profitability.
First Solar (FSLR)
A direct play for green stocks, First Solar (NASDAQ:FSLR) is a manufacturer of solar panels. It also provides utility-scale photovoltaic (PV) power plants. As well, it supports services that include finance, construction, maintenance and end-of-life panel recycling. While solar enterprises struggled last year, FSLR managed to deliver a positive return in 2023.
That’s a major accomplishment, by the way. Throughout 2023, First Solar’s peers struggled mightily due to economic challenges, mostly centered on high borrowing costs. Unfortunately, that headwind impacted both the business and consumer ends. Still, when the Federal Reserve hinted that it could lower interest rates this year, sustainable stocks focused on solar energy skyrocketed. If policymakers go through with the cuts, FSLR could be interesting.
It has many advantages. First, analysts peg shares a consensus strong buy with a $231.11 price target. Second, the market prices FSLR at a forward earnings multiple of 13.22X, lower than the sector median 23.8X.
To be fair, the credibility of the aforementioned discount depends on the Fed. But if the central bank comes through, watch out!
Polestar (PSNY)
I supposed a story about green stocks would be incomplete without mentioning electric vehicles. For that, we have Polestar (NASDAQ:PSNY). To be completely upfront, PSNY presents extraordinarily high risks. Just look at its 52-week chart performance. You’re seeing a whole lot of red and it’s not entirely clear when this situation might reverse itself.
However, if you are willing to take the risk, those simultaneously interested in sustainable stocks should consider this. According to a local NBC report, Polestar achieved the highest green score, beating out EV sector leader Tesla (NASDAQ:TSLA). That’s significant because as the EV space matures, consumers will almost certainly look for alternatives. Thus, Polestar can come into the frame, showcasing its distinct vehicles while also bragging about its green initiatives.
Now, the problem with Polestar centers on its financials. According to investment data aggregator Gurufocus, PSNY incurs five red flags, denoting serious financial vulnerabilities. Still, let’s just assume that the Fed goes through with interest rate cuts. That would potentially lower financing costs for vehicles, which could lift PSNY.
On the date of publication, Josh Enomoto did not have (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.