Can Renewable Energy Group Afford Share Buybacks?

When Congress passed the latest budget deal to fund the federal government, it agreed to extend a slew of tax credits for renewable energy technologies. The single biggest winner may have been biodiesel, for which the lapsed federal biodiesel excise tax credit (BTC) was retroactively reinstated to the first day of 2018 and extended to the end of 2022. The subsidy essentially provides a $1 per gallon tax credit to biomass-based diesel producers.

That means Renewable Energy Group (NASDAQ: REGI), the nation's largest biodiesel manufacturer, will earn a windfall of over $500 million sometime in early 2020 for production from the last two years. The business could earn an additional $1 billion in subsidies during the three-year extension period spanning 2020 to 2022. News of the BTC's revival sent shares of the renewable energy stock soaring.

What will the renewable fuels leader do with its newfound surge in cash flow? CEO Cynthia Warner recently told investors that the company will accelerate its expansion strategy and look to deliver value to shareholders through various means, including share repurchases. Can the money-losing business actually afford share buybacks?

Source Fool.com