Why HA Sustainable Infrastructure Capital Is Back on Investors’ Radar

HA Sustainable Infrastructure Capital (HASI) recently completed its rebrand from Hannon Armstrong Sustainable Infrastructure Capital. The change focuses attention on how its climate focused portfolio and recent returns line up with today’s pricing.

At a share price of US$36.31, HA Sustainable Infrastructure Capital has seen a 5.52% 1 month share price return and 14.11% year to date share price return. Its 1 year total shareholder return of 35.99% contrasts with a weaker 5 year total shareholder return of 16.76%, suggesting momentum has picked up more recently even though the longer term picture has been mixed.

If this climate infrastructure focus has your attention, it can be useful to see what else is moving in related areas, starting with 24 power grid technology and infrastructure stocks as potential ideas to research next.

With the shares at US$36.31 and both an analyst price target and one intrinsic value estimate sitting higher, the question now is whether HA Sustainable Infrastructure Capital is still undervalued or if the market is already pricing in future growth.

Price-to-Earnings of 23.6x: Is It Justified?

At a last close of $36.31, HA Sustainable Infrastructure Capital is trading on a P/E of 23.6x, which screens as expensive against both peers and the wider industry on this measure.

The P/E ratio compares the share price to earnings per share, so a higher figure often reflects the market paying more for each dollar of current earnings. For a climate focused financing business like HASI, this can reflect expectations around future profit growth from its portfolio of energy efficiency, renewable power and other sustainable infrastructure assets.

Here, the company’s P/E of 23.6x stands above the US Diversified Financial industry average of 17.8x and a peer average of 13x, which indicates a clear premium. It also sits above an estimated fair P/E of 14.6x. The market could move toward that level if expectations cool or if earnings increase.

Result: Price-to-Earnings of 23.6x (OVERVALUED)

However, you also have to weigh risks such as a relatively rich P/E ratio, potential earnings pressure from project performance, and shifts in policy or financing costs.

Another Angle on Value: Cash Flows Tell a Different Story

While the 23.6x P/E suggests HA Sustainable Infrastructure Capital screens as expensive, our DCF model points the other way. At $36.31 versus an estimated future cash flow value of $47.56, the shares screen as trading at roughly a 24% discount. Which signal do you weigh more heavily?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out HA Sustainable Infrastructure Capital for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If the mixed signals here leave you unsure, do not wait on others to decide what it means for you. Instead, check out 3 key rewards and 3 important warning signs and weigh the trade off yourself.

Looking for more investment ideas?

If this analysis has sharpened your thinking on value and risk, do not stop here. Broaden your watchlist with ideas filtered by quality and fundamentals.

• Spot potential value opportunities early by reviewing our 49 high quality undervalued stocks that screen well on both price and fundamentals.
• Prioritize income and resilience by checking out the 15 dividend fortresses that focus on higher yielding payers.
• Focus on financial strength first by scanning the solid balance sheet and fundamentals stocks screener (40 results) that clear strict balance sheet and fundamentals checks.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.