Pacific Ethanol Inc. (NASDAQ: PEIX) will open its 3rd plant in Visalia, CA. This plant is only about 65 miles or so from the company’s 1st facility under construction in Madera, CA. On April 5th, I detailed the plan by Pacific Ethanol to build its 2nd plant in Oregon, and it finally became official today via a news release (ValleyVoice).
Pacific Ethanol is moving forward with its business plan to build five ethanol plants in the Western United States. The stock continues to surge despite high valuations as this point. As of now PEIX is sitting at a market cap of $1.24 billion.
I think Pacific Ethanol is making all the right moves and has perhaps the best location (California) and the best business plan among any public ethanol company. However, is the valuation justified? With the flood of new ethanol plants under construction throughout the United States and possibility of cheaper imported Ethanol, what will the margins be in the future?