Sunnova Energy International Inc

Sunnova Energy International Inc (NYSE: NOVA) is an electricity Company providing residential energy and solar storage service. The Company also offers rooftop solar service through local installation partners and sales partners.

Investment Highlights - Sunnova Energy International Inc – Expensive at USD 50.25

• Despite the higher revenue, the Company reported an increase in loss in Q3 and 9M period for FY2020, reflecting higher expenses incurred.
• The Company has reported a negative ROE (return on equity) of 9.3% in Q3 FY2020. The ROE from last three years remained in the negative zone.
• As per valuation metrics, EV/Sales, EV/EBITDA and Price/Cash Flow multiples of the Sunnova Energy International Inc are currently higher as compared to the corresponding multiples of the Renewable Energy industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is supporting downward movement (around 63 level), which means the stock price could decline in the short term.

Key Risks

• Any change in regulations and government policies could affect the overall business of the Company.
• The market conditions in which the Company operates is full of challenges and might impact the operational performance and reduce financial performance as well.

Financial Highlights – Q3 & 9M FY2020 (30 September 2020) (released on 28 October 2020)

(Source: Quarterly Report, Company Website) 

• In the Q3 and 9M period ending 30 September 2020, driven by a higher number of customers served, the revenue improved for the period.
• Driven by higher cost of revenue, operations and maintenance expenses, the loss for the period increased in Q3 and 9M period.
• The Company’s cash balance as on 30 September 2020 slightly increased to $84,635 thousand (31 December 2019: $83,485 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

The Company has shown a decline in financial performance in the third quarter and nine months period of FY2020. Despite the higher revenue, the bottom-line performance declined, while profitability remained in the negative zone. The Company has a higher cash balance with a well-positioned balance sheet. The operating expenses in the Q3 and 9M period have increased, which needs to be controlled unless it will reduce the financial performance in the long run and will also impact operational performance as well. In FY2020, the Company expects to add 28,000 to 30,000 customers additions and will generate adjusted EBITDA of in between $58 million to $62 million. NOVA expects adjusted EBITDA for FY2021 to be in between $77 million to $83 million, with customer additions in between 42,000 to 48,000. Presently, the Company is trading near a 52-week high, raising doubts at its upside potential at current prices. The stock made a 52-week low and high of USD 6.12 and USD 57.70, respectively.

Based on the factors as highlighted above, we believe the stock of Sunnova Energy International Inc is “Expensive” at the closing price of USD 50.25 (as on 12 January 2021), with support from few catalysts needs to be evaluated at a later stage such as an increase in customer base.

Green Plains Inc

Green Plains Inc (NASDAQ: GPRE) is a US-based ethanol producer Company. The Company is engaged in the business of corn processing and ethanol production facilities.

Investment Highlights - Green Plains Inc – Expensive at USD 18.75

• Despite the improved financial performance, the Company’s revenue remained significantly impacted and will take time to reach pre-covid-19 levels.
• The Company has reported a negative ROE (return on equity) of 4.8% in Q3 FY2020. The ROE from last four years remained in the negative zone.
• As per valuation metrics, EV/EBITDA and Price/Earnings multiples of the Green Plains Inc are currently higher as compared to the corresponding multiples of the Renewable Energy industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is in the overbought zone and is supporting downward movement (around 78 level), which means the stock price could decline in the short term.

Key Risks

• The Company is exposed to several operational risks associated with geological and weather conditions.
• The ongoing challenges of Covid-19 pandemic may increase its operating cost and hamper business activities.

Financial Highlights – Q3 & 9M FY2020 (30 September 2020) (released on 5 November 2020)

• In the Q3 of the financial year 2020, due to lower trading revenue from energy services and agribusiness, the revenue declined to $208.3 million.
• During the period, the Company reported a significant decline in operating loss and reported positive EBITDA.
• The Company has a decent liquidity position with a cash balance of $182.3 million as on 30 September 2020 and committed working capital revolving credit agreements of $349.8 million.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown an improvement in financial performance in the third quarter and nine months period of FY2020. Despite the lower revenue, the bottom-line performance increased, with higher profitability margins. The Company has a higher cash balance with a well-positioned balance sheet. GPRE reported adjusted EBITDA of $8.8 million for Q3 FY2020, with positive free cash flow.  The Company is expecting stronger results in the fourth quarter based on present market conditions and is expecting higher operating rates. The operations are impacted by the outbreak of coronavirus. Presently, the Company is trading near a 52-week high, raising doubts at its upside potential at current prices. The stock made a 52-week low and high of USD 3.77 and USD 19.22, respectively.

Based on the factors as highlighted above, we believe the stock of Green Plains Inc is “Expensive” at the closing price of USD 18.75 (as on 12 January 2021), with support from few catalysts needs to be evaluated at a later stage such as improvement in trading condition.

*Dividend Yield may vary as per the stock price movement.

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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