EDP Renovaveis (ELI: EDPR)

Absicherung, Alternativ Energie, Investment, Progredo, Prudens Investment Funds

EDP Renovaveis (ELI: EDPR) is a renewable energy company based in Madrid, Spain, that operates primarily in Europe, North America, and South America. The company was founded in 2007, and as of 2021, is the fourth largest wind energy producer in the world and has exhibited massive, multinational growth over the past decade. The stock trades on the Euronext Lisbon exchange and is priced in Euros. While shares of EDP surged at the beginning of 2021, they have since regressed back down to its current price level of 18.83 Euros, a decline of nearly 30% from the recent high of 26.40 Euros.
Learn more

Renewable energy has been a massive tailwind in Europe, especially after many countries recently committed to shifting industrial infrastructure to using renewable sources like hydrogen and naturally occurring energy sources like wind and solar. It seems as though EDP is in the right space at the right time, so if you are thinking of adding it as an investment to your portfolio, look out for the following catalysts.

The Bullish Case: As mentioned, Europe is in the midst of a continental shift to renewable energies, so EDP is well positioned to take advantage of this change. EDP also operates wind farms in multiple countries around the world including Canada, Brazil, Mexico, Spain, Portugal, the United States, and Greece, just to name a few. The amount of electricity generated by all of its farms has grown steadily every year since 2014 alongside revenues, and an equally steady decline in operating costs. EDP is functioning exactly as a high growth company would, and in 2019, put up an impressive 90% EBITDA to Revenues ratio. EDP currently boasts over 200 wind farms globally, as well as more than 15 solar parks. EDP specializes in floating wind farms that operate off of coastlines, which reduces the amount of land needed and also receives full ocean wind without any obstacles in the way. EDP farms and parks generate enough electricity to power over 3 million homes every year.

The Bearish Case: While offshore wind farms are ideal for generating the most power in a highly concentrated area, they are also resource and cost intensive, which may put a cap on profits. EDP also has a highly levered balance sheet, with 4.84 billion Euros in debt and and only 474 million Euros cash on hand, according to Yahoo finance. EDP is also trading at a relatively high price/earnings ratio at nearly 30 times trailing earnings, even though the stock looks to be at an affordable price level. All of these are indicative of a high growth company, but investors who are looking for a stable investment may be turned off until EDP has exited their growth stage.

Final Verdict on EDP: EDP is an excellent company in the renewable energy industry that is still experiencing its high growth stage. For those who are looking for a more secure investment, there are more established renewable energy stocks out there, but for those looking to get in with a company that operates over 200 wind farms around the world, EDP may be for you. It paysa minimal dividend, but with the impending switch to renewable energy resources in Europe and around the world, investors should be looking to EDP for high growth gains over the next decade.