HA Sustainable Infrastructure Capital trades at $37.80 and has moved in lockstep with the market. Its shares have returned 9.8% over the last six months while the S&P 500 has gained 7.1%.

Is there a buying opportunity in HA Sustainable Infrastructure Capital, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Is HA Sustainable Infrastructure Capital Not Exciting?

We’re sitting this one out for now. Here are three reasons you should be careful with HASI, plus one stock we’d rather own.

1. Recent EPS Growth Below Our Standards

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

HA Sustainable Infrastructure Capital’s EPS grew at an unimpressive 9.7% compounded annual growth rate over the last two years, lower than its 18.7% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

2. Previous Growth Initiatives Haven’t Impressed

Return on equity (ROE) measures how effectively financial firms generate profit from each dollar of shareholder equity — a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, HA Sustainable Infrastructure Capital has averaged an ROE of 5.8%, uninspiring for a company operating in a sector where the average shakes out around 10%.

3. High Debt Levels Increase Risk

HA Sustainable Infrastructure Capital reported $124.5 million of cash and $5.39 billion of debt on its balance sheet in the most recent quarter.

As investors in high-quality companies, we primarily focus on whether a company’s profits can support its debt.

With $182.5 million of EBITDA over the last 12 months, we view HA Sustainable Infrastructure Capital’s net-debt-to-EBITDA ratio as inadequate. The company’s lacking profits relative to its borrowings give it little breathing room, raising red flags.

Final Judgment

HA Sustainable Infrastructure Capital isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 12.9× forward P/E (or $37.80 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We’re fairly confident there are better stocks to buy right now. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

Stocks We Would Buy Instead of HA Sustainable Infrastructure Capital

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