Among the best algae and biofuel stocks to buy now

We recently made a list The 7 Best Algae and Biofuel Stocks to Buy Now. In this article, we’ll take a look at how OPAL Fuels Inc. (NASDAQ:OPAL) stacks up against other algae and biofuel stocks.

In today’s world, climate change in the form of global warming and increased CO2 emissions in the air has become a serious problem to solve. Global carbon dioxide emissions have risen to a record high of 422 parts per million (ppm) in August 2023, as reported by Insider Monkey, discussing Top 25 carbon dioxide emitting countries.

As a result, biofuels have the potential to reduce carbon dioxide emissions by 86% when blended with traditional gasoline fuel, as reported in another article discussing biofuel market.

Biofuels are renewable energy sources derived from biological sources, such as cow dung, grain, or sugarcane. The U.S. Department of Energy’s Bioenergy Technologies Office (BETO) is also working with industry to use algae-based resources to produce biofuels. Two types of biofuels commonly used around the world are ethanol and biodiesel.

Biomass, which refers to plant resources, is used to produce ethanol, which is a renewable fuel. Ethanol can then be blended with gasoline to create cleaner energy. This is done by increasing the octane number and reducing carbon monoxide emissions.

Biodiesel, on the other hand, is produced from renewable resources, such as new and used vegetable oils and animal fats. Biodiesel, a liquid, directly replaces petroleum-based diesel fuel.

Global Biofuel Industry

According to Markets and marketsThe global biofuel market was valued at $167.4 billion in 2023 and is expected to reach $225.9 billion by 2028 at a CAGR of 6.2%. Biofuel demand is forecast to grow by 6% in 2024 compared to 2022, with most of the demand coming from the United States and Europe International Energy Agency.The United States has 1.3 billion tons biomass feedstock, which allows for the production of over 3 billion gallons of ethanol.

Growing concerns about energy security and the need to reduce greenhouse gas emissions are driving the industry’s growth. Economies are largely dependent on fossil fuels, which are finite and depleting at a faster rate in the Earth’s crust. As such, biofuels are a sustainable and cleaner alternative. This is driving industry growth projections of 38 billion liters between 2023 and 2028, up 30% from the previous five-year period, according to IEA.

Taking into account the projected increase in biofuel consumption in the coming years, analysts predict that oil demand in the transport sector will decrease by 4 million boe/d (million barrels of oil equivalent per day) by the end of 2028.

The story continues

Algae biofuel industry

Algae biofuel is produced using algae as the primary source of energy-rich oils. It acts as a substitute for biofuel derived from other crops, such as sugar cane and timber. Its production is based on the collection and cultivation of algae, which are then converted into biofuels. They are widely popular for their environmental sustainability, as they reduce the carbon footprint.

The algae biofuel market was valued at $8.04 billion in 2023 and is expected to grow at a CAGR of 5.76% between 2024 and 2031, reaching $12.6 billion, according to Data Bridge Market Research. Demand is being driven by government support for the production of environmentally friendly energy sources. For example, the European Commission has supported at least 300 algae and biofuel projects by 2023. In addition, algae are highly efficient, providing 20 times more efficiency than other biofuels on the market, such as those from corn and beets.

The US Biofuel Market

The United States is the largest producer and also the largest consumer of biofuels in the world. According to Environmental Impact Assessment (EIA)In 2022, 18.7 billion gallons of biofuel were produced and blended with diesel and gasoline for use in vehicles and other applications.

As with other biofuels, the United States has a huge potential for algae biofuels, as the government plans to produce 5 billion gallons of algae biofuels by 2030. The US biofuel market is therefore expected to reach $56.04 billion by 2030, showing a growth of 7.9% between 2023 and 2030 (as estimated by Coherent Market Insights). Government support is the backbone of this increased consumption. The US government launched the Renewable Fuels Program in 2005 to increase the use of renewable fuels as an energy source and reduce dependence on petroleum, showing the country’s commitment to the cause.

Our methodology

To pick the 7 best stocks to buy in the algae and biofuels space, we gathered a list of potential stocks with a significant presence across the biofuels industry using online rankings and ETFs. We then narrowed down the stocks based on a variety of metrics, including financial health, the number of analysts covering the stock, and their expected growth potential. Finally, the stocks were ranked based on the number of hedge funds that held them as of Q2 2024.

Why are we interested in the stocks that hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

A gas pipeline glowing in the night sky, showing its importance in everyday life.

OPAL Fuels Inc. (NASDAQ:OPAL)

Number of hedge fund owners: 14

We have OPAL Fuels Inc. (NASDAQ:OPAL) on our list of the 7 best algae and biofuel stocks to buy now. OPAL Fuels, Inc. produces and distributes renewable natural gas (RNG) for heavy-duty and medium-duty trucks. It also builds and operates fueling stations focused on natural gas and hydrogen. The New York-based company also supplies renewable energy to utilities.

For the quarter ended 30^t OPAL Fuels Inc. (NASDAQ:OPAL) reported revenue of $71 million in June 2024, up 29% from the same quarter last year. The company also reported EBITDA (earnings before interest, taxes, depreciation, and amortization) of $18.9 million. The key drivers of this increase were higher margins in the fuel station segment and increased RNG production. OPAL Fuels Inc. also secured contracts for the second half of 2024.

According to Adam Comora, CEO of OPAL Fuels Inc.,

The company produced 0.9 million British Thermal Units (MMBtu) of renewable natural gas (RNG) in the second quarter, up 50% from the same period last year. The company generated $18.7 million from sales of RNG as a transportation fuel.

According to DeloitteRNG has the potential to replace 4.4% of current U.S. fossil gas demand and 16.5% of baseload gas demand. This reflects the potential for massive growth for OPAL Fuels Inc. in this segment.

The Company recognizes this potential and plans to maintain RNG production of 4.0 to 4.4 million MMBtu by the end of 2024. In partnership with energy infrastructure company South Jersey Industries, OPAL Fuels Inc. has begun construction on a 0.92 million MMBtu RNG production facility, as announced in August 2024.

Despite the company’s heavy focus on developing RNG projects, the company faces continued upward pricing pressure to secure the biogas rights that are necessary to produce RNG. Investors should be aware of potential sales losses due to intense competition and pricing.

Considering the company’s growth prospects and strategic investments, six analysts predict the stock price to increase by 121.64%. In addition, 17 hedge funds are optimistic about the stock in Q2 2024.

Total OPAL takes 7th place on our list of the best algae and biofuel stocks to buy. While we recognize OPAL’s potential as an investment, our belief is based on the belief that some AI stocks are more promising in terms of delivering higher returns and doing so in a shorter time frame. If you’re looking for an AI stock that is more promising than OPAL but is trading at less than 5 times earnings, check out our report on cheapest AI action.

READ NEXT: $30 Trillion Opportunity: The 15 Best Humanoid Robot Stocks to Buy, According to Morgan Stanley, and Jim Cramer Says NVIDIA ‘Has Become a Wasteland’

Disclosure: None. This article was originally published on Insider Monkey.