Among the sectors investors are increasingly focusing on right now is renewable energy. In this sector, Boralex (TSX: BLX) is one Canadian stock investors have their eye on right now.
The renewable energy player is the biggest owner of onshore wind turbines in France. Additionally, the company provides solar, thermal and hydroelectric power to a number of global markets. This company’s market capitalization of $3.9 billion is meaningful, yet small, relative to other renewable energy stocks right now.
Accordingly, there are a number of investors who think the upside with Boralex stock is worth the company’s valuation right now. Trading at 96 times trailing earnings, Boralex certainly isn’t a cheap Canadian stock. However, it’s one that I think has tremendous upside from here.
Let’s dive into why.
Outstanding fundamentals make this a top Canadian stock
Fundamentals are important for any investment. Indeed, knowing how richly valued a given stock is relative to its growth prospects is important.
In this regard, I think there’s a lot to like about Boralex.
Boralex has recently reported strong numbers as well as excellent forward guidance on both top- and bottom-line growth. Indeed, the fact that Boralex is profitable is one of the key factors I like about this stock. It’s a company with excellent operating leverage that’s currently focused on key markets in Europe and globally with rising renewable energy needs.
The company’s five-year plan spells out investments that should add 4,400 MW of power to the company’s current portfolio. This implies a relative doubling of Boralex’s existing capacity. For those doing their cash flow models, this is a good thing. Should renewable energy prices continue to tick higher (and I think they will), Boralex is a Canadian stock that’s well positioned to profit from this environment.
Boralex considers selling stake in French unit
Now, all these investments will cost a lot of money. Accordingly, like many other highly capital-intensive business models such as utilities, Boralex will be looking to prioritize investments and constantly re-assess its portfolio for where the company can create value for shareholders.
In this context, I think Boralex is doing a fantastic job.
Boralex has announced the company is considering the option of selling a minority stake of its French business. The goal behind this move is raising funds for expansion someplace else in the United States and Europe.
With deliberations going on, Boralex might still go against a stake sale. The company laid out some new objectives for 2025 at an investor day in June. This included making the U.S. its prime market for development. It also discussed diversifying its footprints across France and Europe as well.
A company spokeswoman stated that Boralex anticipates investing an amount ranging between $5 billion to $6 billion for its 2025 strategic plan. Accordingly, forming partnerships can prove to be a way of raising a certain portion of these funds. She further went on to state that they are considering all options carefully for achieving their ambitions.
The push comes after both the European and Washington Union look forward to boosting solar and wind power to cut off carbon emissions. In this context, I like where Boralex is positioned right now.
