Drax Group Plc (LON: DRX) is the United Kingdom’s largest biomass and renewable energy producer by output and is one of our top renewable energy company to keep an eye on. It operates a portfolio of biomass, hydroelectric, and pumped hydro storage facilities across the UK.
Drax Group Plc was listed on the London Stock Exchange (LSE) in 2005. It has a market cap of £2.55 billion with a net revenue of £8,125 million and an EPS of £1.42 for FY 2023.
Although the company operates hydroelectricity production and pumped storage operations, its main renewable energy source comes through biomass pellet processing facilities. In this article we will review the financial report, future plan and our view on Drax group share price forecast.
- Drax Group Plc Stock Continues the Rally in 2024
- How Have the Drax Group Competitors Performed in 2024?
- What are the Drax Group Stock Forecasts for 2024 Q3, Q4 and Beyond?
- Should I buy Drax Group (LON: DRX)?
- Should I sell Drax Group stock?
Drax Group Plc Stock Continues the Rally in 2024
Drax Group’s share price took a hit in the last few months when it posted a significant increase in its profits earlier this year. This has impacted the Drax group share price forecast as the company is now heading towards an upward trend.
It recorded a core net profit of £1.21 billion for FY 2023 up from £731 million in FY 2022.
Although it is far from the peaks of 800p recorded in 2022, the momentum is there.
The recent rally of the stock is backed by a strong H1 2024 of the group where it posted an operating profit of £518 million up from £392 million for H1 2023. When stocks experience a sudden price rise, you should conduct a thorough examination.
When we look at some of the key numbers like its EPS of £1.43, DPS of £0.23, and P/E of 4.0 – we assume a strong financial position for the stock. However, it still needs some catching to do in terms of its historic share price peaks and other metrics.
So, we can expect the stock (DRX) to go further up keeping in mind the current healthy financial results and announcements from the group.
Backed by its positive cashflows and significant operating profits, the group recently announced a share buyback program of £300 million for the next two years.
The stock carries a market beta of 1.615 meaning it’s more volatile than the market. It means if the market falls, the DRX stock will show more volatility than the market and vice versa.
How Have the Drax Group Competitors Performed in 2024?
The renewable energy and electricity production companies in Europe have had a mixed year so far. Some stocks like Drax (LON: DRX) have had an upward movement while others had a stalled year.
For instance, Romande Energy Holding SA (REHN: SW) is trading at 55.20 CHF below its 52-week high mark of 58.8 CHF. The stock’s 1-year yield is around 8% while its YTD is a meager 0.36%.
The Italian electricity producer ACEA has had a good financial year where it is trading around 16.63 EUR which is still lower than its 52-week high point of 17.73 EUR. The stock’s YTD is a healthy 20.39% currently.
Similarly, the German renewable energy firm Encavis AG (CAP: VI) is trading in the range of 17.05 EUR and a YTD of 9.91%.
What are the Drax Group Share Price Forecasts for 2024 Q3, Q4 and Beyond?
If the latest financial results and the current implementation of its share buyback program are something to hint at, we can see the DRX moving further up in Q3 and Q4.
DRX stock forecasts for the short term are positive as it is yet to reach its peak point of previous years.
The group’s 9 panelists have a consensus of operating profits in the range of £881-996 million. The EPS forecasts are 116.2p and dividend per share forecasts are 25.3p. It means the group is expecting more positive financial results in the second half of 2024.
Should I buy Drax Group (LON: DRX)?
If you keep an eye on the risk factors for the Drax Group Stock along with the current price movements, you can make a better decision.
If you are looking for an immediate decision, the stock is likely to move upward in the coming days. However, the group might not sustain its current level of profits and surplus cash after completing the current buyback of £300 million.
Therefore, before making a call, keep an eye on the long-term risk factors like market volatility, the demand-supply balance for renewable energy in the UK, and the Drax Group’s ability to secure potentially long-term energy generation contracts.
Drax Group’s profit forecast looks promising, but its high debt level raises concerns. The company needs to manage its debt carefully to avoid negatively impacting its financial performance. Additionally, Drax Group’s ability to secure long-term energy generation contracts will play a crucial role in its future success.
Judging by their H1 2024 report, there are few key points:
- Strong balance sheet: £682m of new term loan.
- 12.6% increase in dividend per share.
- £300m two-year share buyback programmer (Q3 of 2024)
- Opportunities to expand the Cruachan Power Station.
- Long term contracts (2027-2042) of over £220m for the Cruachan which will become a 480MW site by 2027
Should I sell Drax Group stock?
If your trading using leverage, you can start a short position without any past buy. While Drax group stock is on the rise, making a decision to sell on stocks such Drax is difficult. As these stocks tend to change direction on their financial result calendar.
These are some risks that we find with Drax Group:
- High debt-to-equity ratio
- Drax recently received a $25 million fine for inaccurate data. Such news can come up in the future and might have a severe impact on the company’s stock.
Recap
Drax leads in biomass power generation. It has a strong growth plan targeting post-2027. With over 3,000 employees the company sits in a strong position for expansion across the UK and globally.
We view Drax as a long-term hold. Renewable energy stocks show their value over time.