A subsidiary of Green Plains Inc. (GPRE), Green Plains Partners LP (GPP) provides ethanol and fuel storage, terminal, and transportation services by owning, operating, developing, and acquiring ethanol and fuel storage tanks, terminals, and transportation assets. It holds or leases 32 ethanol storage facilities and roughly 49 acres of land. In comparison, renewable fuels company Gevo, Inc. (GEVO) commercializes gasoline, jet fuel, and diesel fuel to achieve zero carbon emissions and reduce greenhouse gas emissions with sustainable alternatives. Its products include renewable biodiesel, isobutylene, ethanol, and animal feed.
Governments around the globe have been taking steps to transition the countries’ economies to a renewable-energy-driven sustainable future. While several advances are being made in solar and wind energy, among other renewable energy sources the demand for biofuel has been growing due to its applicability in the road transportation market. Biofuels are expected to help lessen dependence on fossil fuels significantly. According to a Market Research Future report, the biofuel market is expected to grow at a 7.81 CAGR to $245.48 billion in 2027. As a result, both GPP and GEVO could benefit.
GPP’s shares have gained 51.7% over the past year, while GEVO’s returned 896.6%. Also, GEVO’s 446.7% gains over the past nine months are significantly higher than GPP’s 37.8% returns. However, in terms of year-to-date performance, GPP stock is the clear winner with 43.9% gains versus GEVO’s 37.7%.
But which of these two stocks is a better buy now? Let’s find out.
Latest Developments
In March GPP completed the sale of the storage assets and the assignment of certain rail transportation assets associated with Green Plains Ord LLC for $27 million. Todd Becker, the company’s president and CEO, said, “Closing on the sale of Green Plains Ord delivered additional proceeds to more quickly reduce the partnership’s debt, further strengthening its balance sheet.”
GEVO and Total Cray Valley announced in May that they had completed phase 1 of their joint development agreement (JDA) to upgrade fusel oils into renewable isoamylene. GEVO’s Chief Technology and Innovation Officer, Dr. Paul Bloom, said, “The team has achieved an important milestone with the success of Phase 1 to deliver plant-based, low carbon solutions to our partner, Total Cray Valley. We look forward to continuing our track record of success at the demonstration scale.”
Recent Financial Results
GPP is expected to release its second-quarter financial results on August 2. The company’s total revenues for the first quarter ended March 31, 2021, were $20.41 million compared to $20.27 million in the prior-year quarter. Its net income increased 3.5% year-over-year to $10.73 million. Its GPP’s EPS came in at $0.45, up 2.3% year-over-year.
GEVO is scheduled to release its second-quarter financial results on August 12. Its total revenues declined 97.6% year-over-year to $93,000 for the first quarter ended March 31, 2021. The company’s net loss increased 8.7% from the same period last year to $10.06 million. Its loss per share came in at $0.05 compared to $0.64 in the year-ago period.
Past and Expected Financial Performance
GPP’s total assets grew at a 2.6% CAGR over the past three years. Analysts expect the company’s revenue to increase 1.5% for the about-to-be-reported quarter ended June 30, 2021, and 2.5% in the current year. Its EPS is expected to grow at a 15% rate per annum over the next five years.
In comparison, GEVO’s total assets grew at a 94.4% CAGR over the past three years. The company’s revenue is expected to decline 41.3% for the about-to-be-reported quarter ended June 30, 2021, and 74.5% in its fiscal 2021. Its EPS is expected to increase at a rate of 25% per annum over the next five years.
Profitability
GPP’s $83.48 trailing-12-month revenue is much higher than GEVO’s $1.80 million. Furthermore, GPP is more profitable, with a 0.79 asset turnover compared to GEVO’s 0.01.
Also, GPP’s 29.42% and 33.42% respective ROA and ROTC compare favorably with GEVO’s negative values.
Valuation
In terms of trailing-12-month EV/Sales, GEVO is currently trading at 338.11x, which is 7,515.1% higher than GPP’s 4.44x. And its 321.55x trailing-12-month P/S is significantly higher than GPP’s 3.17x.
So, GPP is the more affordable stock.
POWR Ratings
GPP has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. In comparison, GEVO has an overall F rating, which translates to a Strong Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
GPP has a B grade for Stability, which is in sync with its 0.76 beta. GEVO, however, has an F grade for Stability, in keeping with its 3.32 beta.
GPP has an A grade for Quality. This is justified given its 33.42% trailing-12-month ROTC, which is 2,204.8% higher than the 1.45% industry average. Again, GEVO has an F grade for Quality, consistent with its negative trailing-12-month ROTC compared to the 1.45% industry average.
Of the 39 stocks in the B-rated MLPs - Oil & Gas industry, GPP is ranked #9. GEVO is ranked #97 out of 99 stocks in the B-rated Chemicals industry.
Beyond what we’ve stated above, we’ve also rated both the stocks for Growth, Value, Momentum, and Sentiment. Click here to access all the GPP ratings. Also, get all the GEVO ratings here.
The Winner
With the increasing use of biofuels in the road transportation space as an alternative to petroleum, the market is expected to grow rapidly in the coming months. However, not all stocks in the biofuel space are well-positioned to take advantage of the industry tailwinds. So, we think it is wise to avoid GEVO now and instead bet on GPP due to its better financials, higher profitability, and lower valuation.
GPP shares rose $0.56 (+4.90%) in premarket trading Monday. Year-to-date, GPP has gained 47.08%, versus a 18.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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