Interested in the high-growth prospects of the clean energy industry? For a closer look at some clean energy stocks with encouraging signs, we ran a screen.
We began by creating a universe of stocks that either use or produce clean sources of energy. We then screened for low-volatility stocks, with average intra-day volatility over the last month under 2% (meaning, on average, these stocks have traded within a 2% range each day).
Then to analyze these companies' profitability, we ran DuPont analysis on the names. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components:
= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)
Because increases in net margin and asset turnover are considered good things, DuPont focuses on companies with these positive characteristics: Increasing ROE along with,
•Decreasing leverage, (i.e. decreasing Asset/Equity ratio)
•Improving asset use efficiency (i.e. increasing Sales/Assets ratio) and improving net profit margin (i.e. increasing Net Income/Sales ratio)
Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
Tool provided by Kapitall (kapitall.com).
Do you think these companies offer less risk? Use this list as a starting point for your own analysis.
List sorted by average intra-day volatility over the last month.
1. Donaldson Company, Inc. (DCI): Engages in the manufacture and sale of filtration systems and replacement parts worldwide. Market cap at $4.99B, most recent closing price at $33.50. Average intra-day volatility at 2.85%. MRQ net profit margin at 10.96% vs. 10.4% y/y. MRQ sales/assets at 0.369 vs. 0.341 y/y. MRQ assets/equity at 1.758 vs. 1.823 y/y.
2. Watts Water Technologies, Inc. (WTS): Designs, manufactures, and sells water safety and flow control products for the water quality, water conservation, water safety, and water flow control markets in North America, Europe, and China. Market cap at $1.21B, most recent closing price at $32.83. Average intra-day volatility at 2.47%. MRQ net profit margin at 4.31% vs. 3.36% y/y. MRQ sales/assets at 0.208 vs. 0.184 y/y. MRQ assets/equity at 1.83 vs. 1.889 y/y.
3. Clean Harbors, Inc. (CLH): Provides environmental, energy, and industrial services. Market cap at $3.12B, most recent closing price at $58.47. Average intra-day volatility at 2.38%. MRQ net profit margin at 5.6% vs. 5.23% y/y. MRQ sales/assets at 0.273 vs. 0.231 y/y. MRQ assets/equity at 2.2 vs. 2.288 y/y.
4. US Ecology, Inc. (ECOL): Provides waste treatment, disposal, recycling, and transportation services to commercial and government entities in the United States. Market cap at $331.96M, most recent closing price at $18.12. Average intra-day volatility at 2.17%. MRQ net profit margin at 13.69% vs. 9.55% y/y. MRQ sales/assets at 0.167 vs. 0.163 y/y. MRQ assets/equity at 1.933 vs. 2.188 y/y.
*Accounting data sourced from Google Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.