The current trend in the renewables sector across North America has truly been impressive, on the upside.
Investors who have piled into such opportunities due to the clear link between renewable energy and the Environmental, Social and Governance (ESG) movement which has transformed how institutional investors such as pension funds and hedge funds invest due to changing mandates, have done very well in recent years.
This optimistic market sentiment has drive valuations across the renewables space broadly higher, leading to a multiple expansion for most renewables companies, making finding a value option difficult.
That said, like most overvalued (or richly/fairly valued) sectors today, there are always opportunities in niche markets for investors who are willing to dig a bit deeper and go off the board, so to speak, with companies they choose to invest in.
One such company which has hit my value radar of late is Green Lane Renewables (TSXV:FTN), a company listed on the Canadian Venture Exchange. This is a relatively small cap company, with decent valuation, and a business model which could turn out to be very profitable over the long-term for investors betting the ESG revolution has just begun.
Green Lane has a few core technologies the company relies on for its growth story. However, its main business investors are focusing on is a biogas production process in which Green Lane uses industrial inputs to turn what would otherwise be waste into natural gas.
Currently, only 0.3% of natural gas today could be considered renewable, but most analysts expect to see an increased number of mandates requiring a higher percentage of renewable natural gas be used (either government mandates or private mandates related to ESG), a transformation which would have significant value for biogas producers like Green Lane.
Invest wisely, my friends.
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