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Northland Power’s Q1 Earnings Show Why it’s 1 of the Best Growth Stocks to Buy

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Electricity high voltage pole and sky
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Written by Daniel Da Costa at The Motley Fool Canada

If you’re looking for some of the best Canadian growth stocks that you can buy and hold for years, renewable energy companies have to be some of the top choices. And while there are several attractive stocks in the space, Northland Power (TSX:NPI) has long been one of the most impressive.

Green energy stocks like Northland offer tonnes of natural long-term growth potential, as society tries to lessen and even reverse the impacts of climate change by transitioning to cleaner energy.

Furthermore, the industry is also highly defensive, making these some of the best Canadian growth stocks to buy in the current environment. So, it’s no surprise that Northland, which reported earnings last night, once again beat expectations.

However, it isn’t just the beat that’s notable. Northland again reminded investors why it’s one of the best Canadian growth stocks to buy now.

Northland Power reports impressive first-quarter earnings

What’s impressive about Northland is that often its financial results are strong, but its forward guidance and plans for growth continue to be attractive.

For the first quarter of 2022, Northland reported adjusted EBITDA of $420.1 million, which was well above the consensus estimate of $366.9 million and nearly 17% above its adjusted EBITDA in the first quarter of 2021.

Much of this growth has been funded by the company issuing shares. And at the end of the first quarter, Northland had roughly 12.5% more shares outstanding than there were at the same time last year. However, despite this slight dilution, management continues to create value for shareholders and show why Northland is one of the best growth stocks to buy

On a per-share basis, its free cash flow (FCF) in the first quarter increased by roughly 16.7% year over year. Not only that, but management continues to expect that Northland will earn between $1.15 and $1.25 billion of adjusted EBITDA in 2022 and between $1.20 and $1.40 of FCF/share.

Plus, over the longer term, Northland has several development opportunities that will continue to add growth. Currently, construction activities at its New York onshore wind projects and Helios solar project in Colombia have been progressing as planned.

In addition, its Hai Long offshore wind project team is working to secure agreements ahead of its financial close, which is expected to happen this year. So, there is a tonne of opportunity for Northland to expand its operations both in the near term and over the longer term.

Why Northland is one of the best growth stocks to buy now

In the current market environment, many stocks have been selling off, especially higher-risk growth stocks. The rapid increase in uncertainty in markets means that investors are now looking for highly reliable businesses.

So, traditional growth stocks, such as higher-risk tech stocks that are still unprofitable, have fallen out of favour. Meanwhile, a high-quality company like Northland, with a massive runway of growth and highly defensive operations, has quickly become of the best growth stocks you can buy.

While it almost certainly won’t offer rapid growth potential, Northland can offer low-risk and consistent growth, making it an excellent stock to buy and hold for the long haul.

Plus, in addition to the capital gains potential it offers, Northland also returns cash to investors, and currently, its dividend has a yield of more than 3%.

If you’re looking for high-quality growth stocks to add to your portfolio or if you want exposure to green energy, Northland continues to show it’s one of the best stocks you can buy today.

The post Northland Power’s Q1 Earnings Show Why it’s 1 of the Best Growth Stocks to Buy appeared first on The Motley Fool Canada.

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Fool contributor Daniel Da Costa has positions in NORTHLAND POWER INC. The Motley Fool has no position in any of the stocks mentioned.

2022

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