Thursday, December 9, 2021

A Small Cap Equity holding: Ameresco, Inc. (AMRC, $96.58): “Clean Energy Creating Green Earnings” By: Andrew Payne, AIM Student at Marquette University

 Ameresco, Inc. (AMRC, $96.58): “Clean Energy Creating Green Earnings”

 By: Andrew Payne, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


·         Ameresco, Inc. (AMRC, $96.58) engages in the supply of energy services including energy efficiency, infrastructure upgrades, asset sustainability, and various renewable energy solutions.

·         Ameresco operates all throughout North America and Europe, providing a broad range of products and services including the design, engineering, and installation of equipment; improvements of facilities’ energy efficiencies, and a broad range of renewable energy solutions and services that lead to energy savings for its customers.

·         Ameresco recently landed a giant $892 million storage project contract with Southern California Edison Company that is estimated to account for ~96.5% of total project revenue in 2022.

·         Ameresco beat Q3 ’21 average earnings estimates by a staggering ~20% largely due to major contract wins and 18.6% YoY growth of its operating portfolio.

Key Points: Despite the pandemic, worldwide renewable energy capacity spiked 45% in 2020. This growth within the clean and renewable energy industries has created a demand for Ameresco’s services. Due to this, many companies are trending towards creating clean or renewable energy efficiencies and solutions within their facilities, products, and services. This has created an influx of bidding opportunities for Ameresco, and they have been able to cash in on these opportunities throughout 2021. Although there is a lot of opportunity to win bids for Ameresco, they must be strategic in how they bid, because they do not have the resources to keep up with the current market demand. Ameresco has nearly $2.25 billion worth of projects backlogged, and this figure is only growing as they are continuing to grow their operating assets and assets in development in hopes of taking on more projects across a wider range of services. As Ameresco begins to complete some of these larger projects that have been on backlog, the completed projects will showcase their results and help drive the price of future bids, as well as being able to beat out competitors for the most profitable projects.

Like any company, Ameresco faces risks and challenges within their core operations and the industry. As of Q3 ‘21, 70% of its sales come from government entities. Although government spending on clean and renewable energy (through the Biden administration) does not show signs of slowing in the near future, Ameresco would be greatly impacted by any decline in spending.

Another challenge that Ameresco faces is long selling cycles. Ameresco does not have the resources to constantly take on new projects which puts a limit on the amount of revenue they can generate in a given period. Selling cycles for Ameresco tend to last anywhere from 18 – 52 months, and projects can get backlogged quickly when problems arise, or a more profitable contract becomes available for bidding. Ownership control is another issue surrounding the controllership of Ameresco as the CEO and founder, George Sakelaris, holds ~75% of company voting power.

What has the stock done lately?

Ameresco’s share price grew 45% in Q3 ’21, much of which is attributable to performance in this past month of October ‘21. This growth is driven by factors both internal and within the industry. Ameresco is expanding its horizons by reinvesting earnings back into the company to provide a broader range of services. It is important that Ameresco continues to expand its services being in such an innovative industry. Asset in development growth is another major driver of growth, as it has grown 8.2% QoQ ’21. This is a very important metric of Ameresco’s business because it helps them to gauge their future capacity to generate clean energy and deliver renewable energy sources, which its revenue streams are heavily reliant on.

Past Year Performance: Over the past year, Ameresco’s share price grew 150%. As previously discussed, asset in development growth is a very important metric. This saw tremendous YoY growth of 26.4%. Over the past year, Ameresco’s top stake holders have increased their position, representing their belief in management to deliver on their goals.

Source: FactSet

My Takeaway

Ameresco was added to the AIM portfolio at a share price of $15.77 and is now trading at $96.58, yielding a 518.4% return since added to the portfolio. As the government and companies continue to invest in clean and renewable energy sources, Ameresco is in a great position to continue to see grow and expand. In addition to Ameresco’s recent accomplishments of expanding their services and growing their assets in development, they were also awarded on the list of ‘2021 Best Led Companies’, per the Business Wire. Given the room for growth both internally and within the industry, I confidently believe that Ameresco (AMRC) should remain in the AIM portfolio.

Source: FactSet