What’s the Best Small Cap Geothermal Stock? HTM, ORA & LXU

U.S. Geothermal (NYSEAMEX: HTM) and Ormat Technologies (NYSE: ORA) along with LSB Industries (NYSE: LXU) to a lesser degree are three small cap geothermal stocks that operate in different segements of the geothermal market and trade on major exchanges that investors might want to take notice of. After all, geothermal is the fourth largest source of renewable electricity after hydroelectricity, biomass and wind power and the USA is (surprisingly) the biggest producer of geothermal electricity with plants being concentrated in western states. Moreover, geothermal is not just about generating electricity as geothermal heat pumps are a type of central heating and/or cooling system that pumps heat to or from the ground with the main difference between this form of geothermal energy and the form used to generate electricity is that the former uses heat from the sun that has heated the ground while the later uses heat from deep within the earth (the scientific community prefers the term “geoexchange” to describe heat pump energy to avoid confusion). Otherwise, both types of “geothermal” uses are highly efficient and environmentally friendly, but the last few years have not been kind to geothermal investors. However, are small cap geothermal stocks U.S. Geothermal, Ormat Technologies and LSB Industries finally starting to heat up for investors? Here is a closer look:

U.S. Geothermal (NYSEAMEX: HTM) Recently Got a Subsidy From Taxpayers

U.S. Geothermal is a renewable energy company focused on the development, production and sale of electricity from geothermal energy and is operating geothermal power projects at Raft River, Idaho, San Emidio, Nevada and Neal Hot Springs, Oregon. In addition, U.S. Geothermal is developing El Ceibillo, an advanced stage, steam geothermal prospect located within a 24,710 acre energy rights concession area 8.5 miles from Guatemala City. On Tuesday, U.S. Geothermal sank 6.78% to $0.41 (I don’t think that puts the stock in compliance with listing requirements) for a market cap of $39.47 million. U.S. Geothermal is up 14.46% since the start of the year, but down 85.2% over the past five years. In November, U.S. Geothermal announced to had received a $10.7 million cash grant from the U.S. Department of Treasury for its San Emidio project that will allow the company to pay down a $7.5 million bridge loan. However and given the current political climate where such subsidies are popular with the part that controls the White House, but not popular with much of Congress who wants to put the brakes on spending, U.S. Geothermal clearly needs to stand on its own two fee. That’s looking difficult as U.S. Geothermal has revenues of $5,894k (fiscal 2012), $3,254k (fiscal 2011) and $2,579k (fiscal 2010) and net losses of $6,222k, $3,954k and $5,839k for the last three fiscal years ended in March. With $178.3 million in total liabilities ($19.3k of them current), a $10.7 million cash grant won’t be enough to sustain U.S. Geothermal for the long-haul.

Ormat Technologies (NYSE: ORA) Has the Largest Market Cap Among Geothermal Stocks

Ormat Technologies (whose parent company is Israeli geothermal energy producer Ormat Industries) is a leading geothermal company and the only vertically-integrated company in the geothermal and recovered energy power business. Specifically, Ormat Technologies designs, develops, owns and operates geothermal and recovered energy-based power plants around the world, geothermal and recovered energy power units and other power-generating equipment and provides related services. On Tuesday, Ormat Technologies rose 0.74% to $20.49 a share for a market cap of $930.88 million. Ormat Technologies is also up 13.6% since the start of the year and down 60.1% over the past five years. In early November, Ormat Technologies reported that total revenues increased 23% to a record $136.1 million while net income of $1 million became a net loss of $0.5 million. However and with a forward P/E of 28.86, Ormat Technologies is hardly a bargain in the utility sector, but its also the geothermal stock with the biggest market cap.

LSB Industries (NYSE: LXU) Has Seen Soft Demand for Its Climate Control Products

LSB Industries is a diversified holding company involved in the manufacture and sale of a broad range of heating, ventilation and air conditioning products (including geothermal heat pump) used in commercial, institutional and residential buildings, as well as the manufacture and sale of chemical products for agriculture, industrial, mining, quarry and construction uses. On Tuesday, LSB Industries rose 0.65% to $33.88 for a market cap of $758.79 million plus the stock is up 20.9% since the start of the year and up 56.6% over the past five years. LSB Industries has a trailing P/E of 10.62 and a forward P/E of 9.03 – meaning it does not look to be overvalued (at least on the surface). However and late in November, LSB Industries announced that it would shut down its main ammonia plant for six to eight weeks of unexpected maintenance work for a pipe rupture and the company will lose $2 million a week during the outage. Otherwise and the last time LSB Industries reported earnings, it reported a 3.2% revenue increase to $182.4 million (Chemical Business sales rose 7.2% but Climate Control Business sales fell 5.3%) and a net income increase from $6.3 million to $6.7 million. LSB Industries’ management noted that the current market for climate control products remains soft, but the business is apparently well positioned to take advantage of an economic recovery when it occurs.

The Bottom Line. Aside from diversified LSB Industries which operates in a different “geothermal” segment, Ormat Technologies looks to be the strongest small cap geothermal stock on a makor exchange while U.S. Geothermal still looks a bit to risky with its debt load.