At first glance, sustainable stocks to buy sounds like a nice concept but that ultimately won’t make you money. If we look at capitalism in the most cynical sense, the ethos strives to maximize profitability while minimizing costs. And it costs money to be sustainable.
However, that may be a poor way of framing the topic. Yes, cutting corners in practices and ethics can yield greater revenue and profitability. However, that’s in the short term. Over the long run, unsustainable practices are, well, unsustainable. Stated differently, going about business in a shady way merely delays inevitable ruin.
Plus, the emerging generation of consumers care deeply about holistic practices. Ignoring this trend can be detrimental to the bottom line. On that note, below are sustainable stocks to buy.
Kellanova (K)
Based in Chicago, Illinois, Kellanova (NYSE:K) falls under the consumer defensive category, specifically packaged goods. Along with its subsidiaries, Kellanova manufactures and markets snacks and convenience foods. As it relates to sustainable stocks to buy, the company features its MorningStar Farms brand, which focuses on plant-based meat.
On the plus side, Kellanova is financially consistent. Between the second quarter of 2023 to Q1 2024, the company’s average positive earnings surprise came out to 15.23%. However, the not-so-pleasant side is that analysts anticipate a top-line erosion. For fiscal 2024, revenue may drop down to $12.67 billion, 3.5% below last year’s print of $13.12 billion.
Assuming a shares outstanding count of 341.88 million, K stock is currently trading at roughly 1.61X projected revenue. That’s a bit hot compared to the 1.5X average over the past five quarters. However, if shares fall down to around $50, the sales multiple would reach approximately 1.35X. That would be a more comfortable entry point. Judging by recent volatility, that price point is a real possibility.
Bloom Energy (BE)
Headquartered in San Jose, California, Bloom Energy (NYSE:BE) works in the industrial segment, specifically in electrical equipment and parts. Per its public profile, Bloom designs, manufactures, sells and installs solid-oxide fuel cell systems for on-site power generation in the U.S. and international markets. BE ranks among the sustainable stocks to buy because it converts fuels such as natural gas into electricity without combustion.
Financially, the company is admittedly hit or miss. Yes, technically speaking, its average quarterly surprise comes out to 92.7%. However, Bloom badly missed the mark in Q2 and Q4 last year and Q1 this year. However, in Q3, it posted earnings per share of 15 cents when experts anticipated a loss of 4 cents.
In the trailing 12 months (TTM), Bloom incurred a net loss of $288.07 million on revenue of $1.29 billion. However, for fiscal 2024, analysts anticipate EPS to hit 10 cents, a big improvement over last year’s loss of 10 cents. Revenue could also expand 9.8% to hit $1.46 billion.
NextEra Energy (NEE)
When it comes to sustainable stocks to buy, NextEra Energy (NYSE:NEE) needs no introduction to those in the know. However, to recap for everyone, the company falls under the regulated electric utilities space. Per its corporate profile, NextEra generates, transmits, distributes and sells electric power to retail and wholesale customers in North America. It features a vast portfolio, including wind, solar and battery storage projects.
Financially, the benefit of owning NEE stock centers on the underlying consistency. Between Q2 2023 to Q1 2024, NextEra’s average positive earnings surprise comes out to 9.53%. Over the TTM period, the company generated net income of $7.49 billion on sales of $27.13 billion. This print enables the utility to deliver a forward dividend yield of 2.69%.
For fiscal 2024, covering experts anticipate that EPS will hit $3.40. That’s a decent improvement from last year’s result of $3.17. However, the consensus revenue target calls for $27.39 billion, which represents a 2.6% decline. Still, the high-side target is aiming for $32.68 billion, which could be realistic given the broader interest in sustainability.
Microsoft (MSFT)
As a software and technology giant, Microsoft (NASDAQ:MSFT) really needs no introduction, period. Chances are, you’re using one of its business software to execute various functions. Or you could be playing video games via its popular Xbox console. However, MSFT is also one of the sustainable stocks to buy thanks to its core ethos. Microsoft broadcasted aggressive sustainability targets, including being carbon negative by 2030.
Of course, the added bonus for owning MSFT beyond the holistic angle is the robust financial performance. In the past four quarters, the company’s average positive earnings surprise came out to 7%. During the TTM period, net income clocked in at $86.18 billion on revenue of $236.58 billion. Presently, the company’s quarterly revenue growth (year-over-year) stands at 17%.
For fiscal 2024, analysts forecast EPS to hit $11.79. That’s a massive leap forward from last year’s print of $9.81. On the top line, Microsoft could reach $244.92 billion. If so, that would represent a 15.6% gain from 2023’s tally of $211.91 billion.
General Motors (GM)
At first glance, putting legacy automakers like General Motors (NYSE:GM) in a list of sustainable stocks to buy seems odd. After all, the sector has been responsible for a large portion of carbon emissions. However, GM is taking a major step forward in being environmentally responsible. In addition to its pivot to new-generation vehicles, it’s targeting the elimination of tailpipe emissions (from new light-duty vehicles) by 2035.
In addition, the company aims to be carbon-neutral in its products and operations by 2040. Financially, the focus on holistic efforts hasn’t impeded its progress. In the past four quarters since Q1, GM’s average quarterly earnings surprise clocked in at just under 14%. Over the TTM period, the automaker posted a net income of $10.62 billion on sales of $174.87 billion.
Looking out to the end of fiscal 2024, analysts anticipate EPS to expand by 24.6% to hit $9.57. On the top line, sales could land at $175.98 billion, a modest increase from last year’s $171.84 billion. The company also offers a forward dividend yield of 1.09%, helping to pad the narrative.
elf Beauty (ELF)
While a cosmetics enterprise might not be the first idea for sustainable stocks to buy, elf Beauty (NYSE:ELF) aims to change perceptions. Together with its subsidiaries, elf is mainly known for its mineral-based makeup and professional tools. Fundamentally, the business has resonated with its core young consumers thanks to its focus on cruelty-free products.
With consumers increasingly voting their conscience with their wallets, elf is making a smart move. As its recent earnings report demonstrated, the prioritization in sustainability hasn’t hurt the business. In fact, it’s probably helped. Over the past four quarters, the average positive earnings surprise came out to nearly 63%. In the TTM period, net income reached $127.66 million on sales of $1.02 billion.
For fiscal 2025, covering experts are seeking EPS of $3.41, a 7.2% increase from last year’s print of $3.18. On the top line, sales could reach $1.28 billion, up 25% from fiscal 2024. Although ELF stock trades at a hot premium of 10.8X, it’s trading at 8.44X forward revenue. Stated differently, it could grow into its valuation.
Enphase Energy (ENPH)
A relevant idea for sustainable stocks to buy, Enphase Energy (NASDAQ:ENPH) is also one of the riskiest. Over the past 52 weeks, ENPH lost almost 26% of equity value. Since the start of the year, shares are underwater by more than 1%. That’s very disappointing but the issue is that the solar technology specialist is struggling amid broader economic concerns.
Analysts are overall bullish on ENPH stock, rating it a consensus moderate buy. That’s great but the problem is that the average price target sits at $125, implying more than 3% downside risk. On the plus side, the most optimistic target calls for $165 per share. It’s a mixed bag financially. While the average quarterly surprise is 1.63%, Enphase missed its bottom-line target in Q4 and Q1.
The ambiguity is reflected in the forecast for the current fiscal year. Analysts anticipate EPS to drop to $2.85, down 35.3% from last year. Also, revenue might only reach $1.47 billion, down almost 36%. However, the blue-sky sales target stands at $1.54 billion. And next year, the high-side view runs up to sales of $2.55 billion.
It’s a risk but speculators should keep it on their radar.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
