An increase of 27% since the beginning of the year. How much higher can small-cap clean energy stocks rise?

Investing in megatrends can help investors generate excess profits over time. One megatrend that is gaining momentum around the world is the shift towards clean energy solutions. Several governments are investing heavily in renewable energy to fight climate change, which makes companies like SolarBank (SUUN) a top investment choice today.

SolarBank shares, valued at $165 million by market capitalization, are up 27% in 2024. Let’s see if you should have these renewable energy stocks in your equity portfolio right now.

SolarBank Review

SolarBank is an independent renewable and clean energy developer and project owner focusing on distributed and community solar projects in Canada and the US. It develops photovoltaic projects that sell electricity to public utilities and commercial, industrial, municipal and residential customers.

The company’s goal is to maximize profits through a diverse portfolio of projects in leading solar markets, including projects involving utilities, solar off-takers and community solar. It has a development potential of over one gigawatt and has developed renewable and clean energy projects with a total capacity of over 70 megawatts.

Recent large projects have driven up share prices

SolarBank recently announced the completion of a $41 million transaction with Honeywell (HON) for community solar projects, as well as the construction of a 1.4 MW rooftop solar project in Alberta. Moreover, it concluded an agreement to acquire Solar Flow-Through Funds for USD 45 million in the form of shares.

SolarBank said it has completed construction of three ground-mounted solar projects for Honeywell in New York. In September last year, it completed the sale of the project to Honeywell with a total capacity of 21 megawatts and signed an EPC (engineering, procurement and construction) agreement to turn the project into a commercial operation. Once construction is complete, SolarBank will retain its operation and maintenance contract, ensuring stable cash flow.

Earlier this week, SolarBank announced plans to develop a 6.41 MW solar project on a 16.98-acre parcel located in Bloomfield, New York. This project will be implemented as a community photovoltaic project, under which a group of solar panels will have access to the local energy grid.

Once these panels generate energy, the clean energy from the facility goes into the local power grid. Depending on the size and number of panels, tenants and homeowners can save money on the electricity generated by the project. If an owner signs up for a community project, they would earn credits on their monthly electricity bills without having to install panels on their home.

What is the target price for SUUN stock?

Over the last nine months, SolarBank reported revenue of $50.4 million and net income of $5.5 million, or $0.20 per share. A year ago, the company reported revenues of $9.15 million and profits of $3.42 million, or $0.13 per share. During this period, operating cash flow more than doubled from $4.65 million to $10.92 million.

The single analyst covering SUUN stock has a Strong Buy rating on the stock, which was recently reiterated in a late May report.

“With the recent acquisition of the Solar Flow-through Fund, the company’s IPP revenue stream is expected to become significant beginning in fiscal year 2024,” Research Capital said in a report. “We expect SolarBank’s profitability metrics to gradually improve as the portion of revenues from the IPP (Independent Power Producer) segment increases.”

The 12-month price target is $10.88, indicating an upside potential of 82.6% from current levels.

On the date of publication, Aditya Raghunath did not have a position (directly or indirectly) in any of the securities mentioned in this article. All information and data contained in this article are for informational purposes only. For more information, please review Barchart’s Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.