By Patrick Foot, financial markets writer at IG
Arguing the relative merits of different eco-friendly vehicles from an environmental standpoint is both complicated and possibly a little redundant. Whichever gas alternative proves most popular amongst the majority of consumers will eventually be picked up by everyone else.
One way of measuring the success (or take a position on the future success) of the major green vehicle types – electric, hybrid or biofuels – is via the stock markets. Major players in each category are all listed on global markets, and as the public adopts their technology, their market position should rise.
As the darling of the electric car world, it’s hard to look beyond Tesla as the major market success story for alternative fuels. In the four years since going public, the high-end EV manufacturer has increased its value ten-fold.
Tesla released its latest earnings on July 31. The story ahead of the announcement was positive, as the company’s value went higher in anticipation of a strong showing. Unadjusted, that strong showing was expected to still return a loss in terms of earnings per share. Even with adjusted figures, Tesla’s level ahead of its earnings announcement was inflated beyond belief – it was priced over 5,000 times higher than its adjusted earnings per share. In the end, Tesla’s figures exceeded expectations and the stock hit a new record high.
So Tesla has an overwhelming enthusiasm and trust from investors, who are willing to continue buying shares in a company known to be hugely overvalued. That’s a sure sign that, to the markets at least, electric vehicles are the future.
Just as Tesla is synonymous with the electric car (despite the Nissan Leaf being the highest selling model), for many Toyota is synonymous with the Hybrid, thanks to its Prius model. The Prius has been on the market for over 15 years, during which time it has become increasingly popular: taking 11 years to reach one million sales, but selling double that figure in the next five.
As the Prius has increased in prominence, Toyota’s stock price has risen. After ending 2011 with a stock price of ¥2565, it has grown to a current level of ¥6,137, peaking at almost ¥6,500 along the way. Those who invested via IG’s CFD share trading market in 2011 could now be seeing a 140% return on their original outlay.
Whilst that growth doesn’t quite match Tesla’s, it’s still a highly impressive performance; in comparison, for the same period Nissan and Honda have both grown just 40%.
Green Plains Renewable Energy have been producing ethanol since 2004, but only went public in 2007. That has placed them well to take advantage of the US’s burgeoning enthusiasm for biofuels, and ethanol fuel in particular.
Despite struggling for a few years after its IPO, Green Plains has seen a rally over the past 18 months. The stock has risen over 300% since March 2013, comfortably beating the majority of competitors in the sector. Once again, the market view of the company remains positive, with five brokers rating it a buy or strong buy.
Clearly, the markets see a lot of positives in Green Plains. But, unlike Tesla, they are still trading at a level fairly close to their reported revenue. Traders, it seems, do not see the same potential in ethanol as they do for electric vehicles.
So, for the markets at least, fully electric cars may be the future: though there’s plenty of value in alternative fuels and hybrids as well. It’s always worth bearing in mind that the majority of traders with shares in Tesla are not experts eco-fuels, though. And if you believe that the future lies away from EV, there’s plenty of opportunity for investment.
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