Over the past six months, HA Sustainable Infrastructure Capital has been a great trade, beating the S&P 500 by 29.2%. Its stock price has climbed to $40.30, representing a healthy 34.3% increase. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in HA Sustainable Infrastructure Capital, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is HA Sustainable Infrastructure Capital Not Exciting?
We’re happy investors have made money, but we don't have much confidence in HA Sustainable Infrastructure Capital. Here are two reasons there are better opportunities than HASI and a stock we'd rather own.
1. Previous Growth Initiatives Haven’t Impressed
Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.
Over the last five years, HA Sustainable Infrastructure Capital has averaged an ROE of 7.2%, uninspiring for a company operating in a sector where the average shakes out around 10%.
2. High Debt Levels Increase Risk
HA Sustainable Infrastructure Capital reported $110.2 million of cash and $5.38 billion of debt on its balance sheet in the most recent quarter.
As investors in high-quality companies, we primarily focus on whether a company’s profits can support its debt.
With $196.7 million of EBITDA over the last 12 months, we view HA Sustainable Infrastructure Capital’s 26.8× net-debt-to-EBITDA ratio as inadequate. The company’s lacking profits relative to its borrowings give it little breathing room, raising red flags.
Final Judgment
HA Sustainable Infrastructure Capital isn’t a terrible business, but it isn’t one of our picks. With its shares topping the market in recent months, the stock trades at 13.5× forward P/E (or $40.30 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now. Let us point you toward a safe-and-steady industrials business benefiting from an upgrade cycle.
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