Northland Power Stock: Buy, Sell, or Hold?

Northland Power (TSX:NPI) stock continues to climb on the back of strong earnings, but with a CEO and president leaving, what now?

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Shares of Northland Power (TSX:NPI) have been powering higher on the back of a strong first-quarter earnings report. But one earnings report does not a company make. Today, let’s look at what could make this company one that investors consider buying, selling, or simply holding on to for now.

Buy

A lot of the positivity came from its recent earnings report for the first quarter. Northland Power reported robust financial results for the first quarter (Q1) of 2024 compared to the same period in 2023. Sales, gross profit, net income, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted free cash flow, and free cash flow per share all exhibited significant increases. This demonstrates strong growth and operational efficiency. 

NPI stock is also making substantial progress on its key projects, including the Hai Long and Baltic Power offshore wind projects and the Oneida energy storage project. These projects are crucial for future revenue generation and growth.

NPI stock also provided a positive outlook for the remainder of 2024. Expected adjusted EBITDA, adjusted free cash flow per share, and free cash flow per share are within projected ranges, indicating confidence in the company’s ability to deliver strong performance in the coming quarters.

Then, there’s the broader reason for renewable energy growth. With a focus on renewable energy, Northland’s portfolio aligns well with global sustainability trends. Its diversified portfolio includes offshore wind, onshore wind, and solar facilities, positioning it as a leader in the renewable energy market.

Hold

There were reasons that brought up some concerns, however. While there have been executive changes, including the departure of the president and chief executive officer (CEO), a transition plan is in place, with the executive chair overseeing operations until a new CEO is appointed. Investors may prefer to wait for further clarity on the impact of these changes on the company’s operations and strategy.

Then there’s the market itself. It’s essential to consider broader market conditions and industry trends before making investment decisions. While NPI stock’s performance appears strong, external factors such as regulatory changes, economic conditions, and competition could affect its future prospects. We’ve seen this happen time and again with renewable energy in the past.

Sell

These reasons alone could lead some investors to flee. Investors should carefully assess the risk factors outlined in Northland’s disclosures, including regulatory risks, project execution risks, and market volatility. If there are concerns about the company’s ability to manage these risks effectively, selling, or reducing exposure may be prudent.

Some of this revolves around the company’s uncertainty over its future. Despite positive financial results and project progress, there is always a level of uncertainty associated with investing in any company. But perhaps, especially with renewable energy right now. Investors with a lower risk tolerance, or seeking more predictable returns, or who simply need the cash sooner as opposed to later may consider selling or reducing their position in NPI stock.

Bottom line

Overall, NPI stock appears to be a strong buy based on its impressive financial performance, progress on key projects, focus on renewable energy, and positive outlook. However, investors should carefully consider executive changes, market conditions, and risk factors before making investment decisions. Holding may be appropriate for those seeking further clarity, while selling may be warranted for investors with higher risk aversion or concerns about uncertainty.

Meanwhile, if you do have NPI stock, at the very least, you could look forward to a monthly dividend yield — one currently at 5.05% as of writing.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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