Can this renewable energy stock continue to skyrocket?

The share price of Powerhouse Energy soared last week! Has this renewable energy stock reached the peak, or can it continue to rise?

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Renewable energy stock Powerhouse Group (LSE: PHE) saw its share price soar in the last few days. Just look at the one-month view in the chart below to see the extent of the surge.

It’s common for penny stocks to see such high price volatility. However, there was a good reason this time as the company announced a proposed joint venture with Hydrogen Utopia last week. With plans to build Powerhouse Group’s first full-scale plastic-to-hydrogen facility, investor interest shot up.

The company develops technology to convert recycled plastic into clean energy. With exciting new initiatives in development, I believe the Powerhouse Group share price has the potential to rise even higher. Now, sat at 2.3p, let’s look at why I’d add this renewable energy stock to my portfolio.

Leading renewable technology

In its FY21 report, Powerhouse highlighted the appointment of CTO Paul Emmitt to the board. This decision underpins the company’s ambitious Global Technology & Innovation Centre (GTIC). Operation is set to commence in the second quarter of 2023.

The GTIC would place the firm in prime position to develop its gasification technology. It would also enable fast and effective responses to the needs of the green market. This is very valuable given countries’ increasing efforts to hit net-zero carbon targets. I think that the GTIC will become a key pillar of this renewable energy stock’s growth.

Yet it must be noted that the funding for the centre has been procured through a £10m share issue. With such a large share dilution, I’m cautious that my investment could be devalued in the near future. 

However, the company achieved significant developments in its operational health. The operating loss decreased from £16m to £2m across FY20-21. Available cash also rose to £9.6m from £3.5m. This has placed Powerhouse Group is a more stable financial position. The company is now free to push investing imperatives forward.

Pushing plastic forward

Another initiative it’s developing is the Protos Plastic Park. Operation is also set for 2023. This waste-to-hydrogen plant may be exactly what this renewable energy stock needs to skyrocket.  

The company has applied thermal conversion technology to solve two key issues. The Protos plant will offer a cheaper and more effective method of plastic recycling. It will do so while also producing clean hydrogen power. 

This dual-offering suggests that Powerhouse could become a very valuable company within the energy sector.

Having said this, Powerhouse has faced a difficult road. Changes to project management and strategy resulted from pandemic-induced disruptions. Because of this, key target dates for construction were missed. Also, lending for the plant increased from £1.15m to £1.89m in early 2022. However, the increase in available cash suggests this won’t burden the company’s financials. 

Overall, I believe it’s in an excellent position to push its initiatives forward. Operational improvements leave the company free to prioritise strategic investment. Indeed, the Protos Park and GTIC have the potential to make this renewable energy stock skyrocket if things go as planned. Because of this, I will be looking to add the shares to my portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Hamish Cassidy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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