Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Renewable Fuels industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Renewable Fuels Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Renewable Fuels Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Renewable Fuels industry for Monday, August 05, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Renewable Fuels industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Alto Ingredients Inc’s Value Grade

Value Grade:

Alto Ingredients, Inc. produces and distributes renewable fuel and essential ingredients and is a producer of specialty alcohols in the United States. The Company's segments include Pekin Campus production, marketing and distribution and Western production. Pekin Campus production segment includes the production and sale of alcohols and essential ingredients produced at the Company’s Pekin, Illinois campus. Its marketing and distribution segment includes marketing and merchant trading for Company-produced alcohols and essential ingredients on an aggregated basis, and sales of fuel-grade ethanol sourced from third parties. Western production segment includes the production and sale of fuel-grade ethanol and essential ingredients produced the Company’s two western production facilities. It produces specialty alcohols, fuel-grade ethanol and essential ingredients, focusing on various markets, such as health, home and beauty; food and beverage; essential ingredients, and renewable fuels.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Alto Ingredients Inc has a Value Score of 83, which is considered to be undervalued.

When you look at Alto Ingredients Inc’s price-to-sales ratio at 0.09 compared to the industry median at 0.66, this company has a lower price relative to revenue compared to its peers. This could make Alto Ingredients Inc’s stock more attractive for value investors.

Now, let’s assess Alto Ingredients Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 49.3, when compared to the industry median of 4.2, the company may be considered overvalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Alto Ingredients Inc’s shareholder yield is higher than its industry median ratio of (4.85%). Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Alto Ingredients Inc’s price-to-book ratio is lower than its industry median ratio of 1.26. This could make Alto Ingredients Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Alto Ingredients Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Alto Ingredients Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 10.05. This could make Alto Ingredients Inc more attractive because the lower P/FCF ratio indicates that Alto Ingredients Inc is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Cardinal Ethanol LLC’s Value Grade

Value Grade:

Cardinal Ethanol, LLC and its subsidiaries is engaged in producing fuel-grade ethanol, distillers grains, corn oil and carbon dioxide near Union City, Indiana and sells these products throughout the continental United States. In addition, the Company procures, transports, and sells grain commodities through grain operations. Its divisions include ethanol and trading. Its ethanol division markets and sells ethanol and its co-products primarily in the continental United States using third party marketers. Its ethanol products are marketed by Murex, LLC and distillers grains are marketed by CHS, Inc. It markets and distributes all the corn oil it produces directly to end users and third-party brokers. The Company's trading division has a grain loading facility within its single site to buy, hold and sell inventories of agricultural grains, primarily soybeans. It performs no additional processing of these grains, unlike the corn inventory the Company holds and uses in ethanol production.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Cardinal Ethanol LLC has a Value Score of 85, which is considered to be undervalued.

Cardinal Ethanol LLC’s price-earnings ratio is 6.3 compared to the industry median at 8.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Cardinal Ethanol LLC more attractive for value investors.

Cardinal Ethanol LLC’s price-to-book ratio is lower than its peers. This could make Cardinal Ethanol LLC more attractive for value investors when compared to the industry median at 1.26.

You can read more about Cardinal Ethanol LLC’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Highwater Ethanol, LLC’s Value Grade

Value Grade:

Highwater Ethanol, LLC is engaged in the production of ethanol and distillers’ grains at the plant. The Company operates through the manufacturing and marketing of fuel-grade ethanol and the co-products of the ethanol production process segment. The Company's products include Ethanol, Distillers Grains and Corn Oil. Its primary product is ethanol. Ethanol is ethyl alcohol, a fuel component made primarily from corn and various other grains. The ethanol it produces is manufactured from corn. The principal co-product of the ethanol production process is distillers’ grains, a high protein, high-energy animal feed supplement primarily marketed to the dairy, poultry, swine and beef industries. The corn oil that the Company produces is not food grade corn oil and therefore cannot be used for human consumption. Its corn oil can be used as the feedstock to produce biodiesel, as a feed ingredient and has other industrial uses.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Highwater Ethanol, LLC has a Value Score of 94, which is considered to be undervalued.

Highwater Ethanol, LLC’s price-earnings ratio is 6.8 compared to the industry median at 8.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Highwater Ethanol, LLC more attractive for value investors.

Highwater Ethanol, LLC’s price-to-book ratio is lower than its peers. This could make Highwater Ethanol, LLC fairly attractive for value investors when compared to the industry median at 1.26.

You can read more about Highwater Ethanol, LLC’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Renewable Fuels Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Renewable Fuels stocks as well as other industrys.

Choosing Which of the 3 Best Renewable Fuels Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Alto Ingredients Inc stock has a Value Grade of A.
• Cardinal Ethanol LLC stock has a Value Grade of A.
• Highwater Ethanol, LLC stock has a Value Grade of A.

Now that you have a bit more background about each of the 3 undervalued stocks in the Renewable Fuels industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Renewable Fuels Stocks

Want to learn more about Renewable Fuels stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Renewable Fuels Stocks for Monday, August 05
• Why Green Plains Inc’s (GPRE) Stock Is Up 10.22%
• Why REX American Resources Corp’s (REX) Stock Is Up 4.87%
• 3 Undervalued Renewable Fuels Stocks for Wednesday, July 17

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.