Is Green Plains a Buy?
Volatility is a common feature of biofuels stocks. Investors evaluating renewable fuels companies as potential additions to their portfolios must weigh government mandates, the lack of enforcement of government mandates, commodity prices, trade restrictions, and a host of other factors. The coronavirus pandemic and government efforts to contain it represent just the latest sources of uncertainty for this energy sector niche.
The challenging operating environment has been especially tough on Green Plains (NASDAQ: GPRE). It's one of the largest ethanol producers in North America, but the ethanol market has been mired in a historic rut. The company's ethanol segment hasn't generated operating income since 2016.
As demand for transportation fuels cratered in mid-March, shares of this small-cap stock declined to lows last seen in 2012. It has more than doubled from its 2020 trough, but shares are still down by about 37% over the last 12 months, and off by 43% year to date. Given all of the moving parts and the company's near-term strategy to boost its margins, investors might be wondering if the stock at current levels represents good value or a value trap. Is Green Plains a buy?
Source Fool.com
