The world of investing is evolving, and the market is increasingly prioritizing sustainability and environmental responsibility. In this shifting landscape, environmental stocks have emerged as a promising avenue for investors seeking long-term growth opportunities.
As we look ahead to the next decade, the potential for growth in this sector is substantial. In this article, we will delve into two standout environmental stocks on the TSX that should be on your radar. These are Ballard Power Systems (TSX:BLDP) and Hydro One (TSX:H).
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Why environmental stocks?
Environmental stocks have captured the attention of investors for several compelling reasons. First and foremost, the global push for sustainability and the transition towards clean energy sources is undeniable.
Governments and businesses worldwide continue to commit to reducing their carbon footprints. The demand for clean technologies and services is set to skyrocket. According to a report by Allied Market Research, the global environmental technology market is projected to reach US$846.03 billion by 2030, growing at a compound annual growth rate (CAGR) of 6.6% from 2021 to 2030.
With this backdrop, let’s explore two environmental stocks that are poised to capitalize on this trend.
Ballard Power Systems
Ballard Power Systems is a leading player in the fuel cell industry, specializing in proton exchange membrane (PEM) fuel cells. These fuel cells are essential for a variety of applications, including electric vehicles, buses, and stationary power generation. Ballard Power has been a pioneer in developing clean energy solutions. It is well-positioned to benefit from the global transition to hydrogen fuel cells.
Despite recent challenges, including a 50% drop in its share price over the past year, Ballard Power stock remains a promising long-term investment. It currently trades at just 0.94 times book value, indicating an attractive valuation.
Randy MacEwen, the president and chief executive officer of Ballard Power stock, remains optimistic about the company’s future, stating, “We are making important progress on our strategic priorities as communicated at our 2023 Capital Markets Day. We continue to see growing customer interest across our market verticals, which is reflected in $25.1 million of new orders in Q2 [the second quarter] and a growing sales pipeline.”
Ballard Power stock’s commitment to innovation, and its expanding order book make it a strong candidate for investors looking to capitalize on the clean energy revolution.
Hydro One
Hydro One stock is a leading electricity transmission and distribution company in Ontario. While it may not be immediately associated with environmental stocks, its role in the clean energy ecosystem is crucial. The company’s transmission infrastructure is vital for delivering renewable energy from various sources to consumers.
Despite a slight dip in its share price over the past year, Hydro One stock offers compelling investment potential. It currently trades at 19.24 times earnings and 1.72 times book value. In the second quarter, Hydro One reported an increase in earnings per share.
This was driven by higher revenues resulting from Ontario Energy Board (OEB)-approved 2023 transmission rates. Additionally, the company’s plans to construct the Waasigan Transmission Line Project, with an estimated cost of $1.2 billion, signal its commitment to supporting the growth of clean energy in the region.
Bottom line
Environmental stocks represent an exciting growth opportunity for investors, driven by the global push towards sustainability. Ballard Power Systems and Hydro One, despite recent fluctuations in their share prices, offer compelling prospects for long-term growth.
Ballard Power’s expertise in fuel cells positions it at the forefront of clean energy technology, while Hydro One’s essential role in electricity transmission supports the expansion of renewable energy sources. As you consider your investment portfolio, keep these two TSX-listed environmental stocks in mind, as they have the potential to generate substantial returns in the years to come.
