HA Sustainable Infrastructure Capital (HASI) Prices $500 Million Green Notes, Is The Stock Too Expensive?

HA Sustainable Infrastructure Capital (HASI) has priced a US$500 million offering of 7.850% green junior subordinated notes due 2057, drawing fresh attention to how the business is funding long dated climate projects.

Recent trading suggests that HA Sustainable Infrastructure Capital’s funding moves are landing with investors. The share price has a 30 day return of 8.6% and a year to date share price return of 24.9%. The 3 year total shareholder return of 101.2% contrasts with a 5 year total shareholder return that is down 15.6%. This points to momentum having strengthened more recently as the latest earnings release and this US$500 million green note issuance reshape how the risk and growth profile is viewed.

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Bulls point to rising earnings and green bond firepower. Bears focus on higher cost hybrid capital and a mixed long term return record. Which side does today’s valuation of HA Sustainable Infrastructure Capital support next?

Price-to-Earnings of 34.4x: Is it justified for HA Sustainable Infrastructure Capital?

HA Sustainable Infrastructure Capital last closed at $39.73, and the P/E ratio of 34.4x places the stock on a far richer earnings multiple than many peers. This means investors are paying a premium for each dollar of profit at the current share price.

The P/E ratio compares the share price with earnings per share. For a specialist financier like HA Sustainable Infrastructure Capital that focuses on long dated sustainable infrastructure assets, this yardstick helps show how much investors are willing to pay for its current earnings stream while it balances dividend payouts, project funding and hybrid capital such as the new green notes.

Relative to the US Diversified Financial industry average P/E of 14.7x, the 34.4x multiple is more than double. This signals that the market is pricing in a meaningfully stronger earnings outlook or lower perceived risk than the sector. Set against the estimated fair P/E of 14.1x, the current level looks even richer. This implies a valuation that could have room to compress toward that fair ratio if expectations soften or earnings do not keep pace with what is implied by this premium.

Explore the SWS fair ratio for HA Sustainable Infrastructure Capital.

Result: Price-to-Earnings of 34.4x (OVERVALUED)

Still, HA Sustainable Infrastructure Capital relies on higher cost hybrid funding and a long dated project pipeline. As a result, any squeeze on spreads or policy support could quickly pressure that premium.

Find out about the key risks to this HA Sustainable Infrastructure Capital narrative.

Another View on HA Sustainable Infrastructure Capital’s Value

The earlier P/E check painted HA Sustainable Infrastructure Capital as expensive. A different lens tells a softer story. Our DCF model suggests the shares at $39.73 trade about 15.8% below an estimated future cash flow value of $47.16. Which signal should investors weigh more heavily when pricing risk?

Look into how the SWS DCF model arrives at its fair value.

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 32 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

Curious whether the mixed signals on HA Sustainable Infrastructure Capital skew more positive or negative right now? Take a moment to weigh both sides for yourself and pressure test the story against the 3 key rewards and 3 important warning signs.

Ready to hunt for more ideas beyond HA Sustainable Infrastructure Capital?

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