Boost Your Long-term Wealth With These Green Energy Stocks

Ballard Power is among the two top green energy stocks that have the potential to create enormous long-term shareholder wealth.

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Oil and gas stocks continue to thrive. I have participated in the fossil fuel sector, and I continue to do so. Yet, beneath the surface, it feels like these stocks are on shaky ground. The reality is, the world is moving toward clean energy at an increasingly rapid pace. While we won’t get there overnight, and it might look different from our current visions, green energy and green energy stocks are a force to be reckoned with.

Here are two green energy stocks to consider buying today for long-term shareholder wealth creation.

Ballard Power: Fuel cells are the green energy of choice for heavy duty vehicles

A green energy stock that needs little introduction is Ballard Power Systems Inc. (TSX:BLDP). As a leading provider of fuel cell products, Ballard has made serious global headway  in making its zero carbon dream a reality.

You see, Ballard’s proton exchange membrane (PEM) has now powered fuel cell electric vehicles (FCEVs) in commercial heavy and medium-duty motive vehicles for a total of 150 million kilometres. In total, Ballard’s fuel cells power over 3,800 buses and trucks in approximately 15 countries around the world.

This is no easy feat. And the progress that has been made continues to drive interest from around the world. Interestingly, Ballard estimates that up to 100,000 zero emissions buses will be deployed in the next 10 years. Think about this. Today, Ballard powers a small fraction of this number. The growth here is massive, and Ballard has positioned itself favourably in this race to decarbonization via fuel cells.

But what are fuel cells?

Well, fuel cell engines generate their electricity from hydrogen. Hydrogen is the most abundant element in the universe. This light, colourless, odourless, and non-toxic gas is a clean alternative to current energy sources. In short, fuel cells have a better performance record for heavy- and medium-sized vehicles than battery-run vehicles, and a better environmental record than oil and gas.

Ballard Power stock has fallen significantly from its 2021 highs, as the company continues to struggle with net losses. However, Ballard’s order backlog was $133 million at the end of 2022, up more than 30% sequentially. Furthermore, the power products order book more than doubled versus last year and was up almost 60% sequentially.

In summary, there is no doubt that the road has been rough. But this is to be expected, as charting your way in a new industry is by definition, rough. Today, the future looks bright for Ballard Power stock, as its seeing strong demand for its fuel cell products. In all likelihood, Ballard’s $914 million in cash and zero debt balance will carry it through until revenue spikes higher.

Northland Power: A steady and consistent green energy stock

For 35 years, Northland Power Inc. (TSX:NPI) has produced electricity from clean-burning natural gas and renewable resources. Its green global infrastructure assets span the globe, with clean-burning natural gas, wind, and solar assets in places such as Asia, Europe, and North America. With more than $2.4 billion in annual revenue and annual cash flow of more than $1.8 billion, Northland is gaining a real footing in the green energy space.

And this space is growing fast, which is illustrated by Northland’s record 2022 results. These results, which came in above expectations, were driven by a strong performance across all of Northland’s facilities. Specifically, sales increased 17% to $2.4 billion. Also, adjusted EBITDA increased 23% to $1.4 billion. Lastly, adjusted free cash flow increased 19% to $461 million.  

Given this growth, we would expect this green energy stock to trade at high multiples, and justifiably so. Yet, the stock trades at 24 times next year’s expected earnings and a mere 2 times book value. These multiples are low in my view given the stellar financial performance and strength of Northland Power.

For example, in the last 12 months, Northland Power generated a return on equity (ROE) of 24.2%. Also, its margins are extremely high. Northland’s gross margin was 88% and its operating margin was 43% in the last 12 months.

The Foolish bottom line

In closing, the two green energy stock listed in this article have a bright future as they participate in the decarbonization of the planet.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Karen Thomas has a position in Ballard Power and Northland Power. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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