Ethanol Stocks to Consider for 2022

In addition to being used to make plastics, beverages, and beauty products, ethanol stocks produce the compound for use in gasoline. Ethanol makes gas burn a little cleaner. In addition, gas containing ethanol is a bit less expensive than gas without it.

Since the conflict between Russia and Ukraine, many countries that import Russian oil have sanctioned the country. Those sanctions include reducing or eliminating their purchase of Russian oil. Since Russia is one of the world’s largest oil exporters, the global oil supply has fallen. At the same time, global oil demand has remained steady.

The supply and demand imbalance in the oil market has caused oil prices to skyrocket this year. Since oil is refined to make gas and diesel fuel, its elevated price has trickled down to gas and diesel prices. Now consumers are paying record-high prices at the pump. Those record-high prices are partly to blame for the record-setting global inflation. Ethanol stock may benefit as folks look for lower-cost options at the pump.

In a move to further reduce gas prices, the Environmental Protection Agency (EPA) increased the amount of ethanol that must be blended into gas in the U.S. If ethanol prices increase with new demand, it could be a boon for ethanol stocks. If ethanol stocks have popped up on your radar recently, here are a few to consider.

The Best Ethanol Stocks to Buy Now

No. 6 Green Plains (Nasdaq: GPRE)

GPRE is an innovative ethanol company changing how ethanol is processed. According to its most recent annual report, Green Plains is installing its MSC technology across the company. The MCS tech is designed to expand the company’s ability to make value-added ingredients while expanding corn yields. In addition, Green Plains is growing its MCS tech with third-party users.

In a recent investor presentation, Green Plains noted that its biofuel has a 46% lower greenhouse gas profile on average than gasoline. Keep in mind that while building out its MCS platform, the company has not recorded positive net income. Also, the stock does not pay a dividend. This ethanol stock could take advantage of tailwinds in the ethanol market.

No. 5 Aemetis (Nasdaq: AMTX)

AMTX makes low carbon ethanol for clean fuel gas and ethanol fuel cell electric cars. The company’s state-of-the-art California ethanol plant has gone through several upgrades recently. The plant installed solar panels and battery storage. The goal is the reach zero-carbon electricity.

According to its recent slide deck, Aemetis believes it can add $8 million of EBITDA (earnings before interest, taxes, depreciation and amortization) by reducing gas and electricity costs. Like Green Plains, Aemetis hasn’t had net income in a few years, and the stock does not pay a dividend.

No. 4 Archer-Daniels-Midland (NYSE: ADM)

ADM is one of the largest food companies in the U.S. Though its ethanol business is a smaller part of the overall business, it plays a vital role in the company’s growth. Some of ADM’s biggest ethanol customers are fuel companies that blend ethanol with gas. In addition, its ethanol is used in alcoholic beverages and industrial materials. Byproducts of its ethanol-making process go to feed cattle.

ADM is one of the most established companies of all the ethanol stocks. The company has a long history of turning annual profits. The stock is up 6% this year, much higher than the S&P 500 stock index. Its stock trades at a P/E ratio of 13 times and pays a dividend yield of 2.2%.

No. 3 REX American (NYSE: REX)

REX in contrast to ADM, is one of the smaller ethanol stocks. However, both of these stocks are two ethanol stocks that could benefit from a booming ethanol market. For instance, its market cap is just under $500 million. Though REX is a smaller company than ADM, it is also profitable. The company reported $8.75 in earnings per share in 2021.

REX owns or has an ownership stake in several ethanol companies in the Midwest, including Wisconsin, Illinois, Iowa and South Dakota. The company invests capital into each company and receives a proportionate share of each company’s earnings. REX stock trades at a P/E ratio of 10 times, but it does not pay a dividend.