Renewable energy valuation multiples are on average approximately 5x for revenue multiple, 18x for EBITDA multiple, and 33x for earnings multiple. (See breakdown of the analysis below.)
Since there are different types of renewable energy production, the analysis below shows the renewable energy valuation multiples by type; i.e. hydroelectric, solar, wind, and alternative energy such as biofuels.
Usually in these types of analyses, I filter for US, Canada and UK companies.
But because renewable energy is not yet considered a mature industry and there are some countries that have more vested interest in renewable energy with foreign investments, I left the screening criteria open to all geographical locations.
My analysis had 202 companies in the dataset. Many companies engage in more than one type of renewable energy production.
For example, Boralex is a Canadian renewable energy company that engages in hydroelectric, solar, and wind production. So, this company is included in the valuation multiples analysis for all three renewable energy types.
Let’s look at the summary of the renewable energy valuation multiples.
Important note: the analysis only looks at profitable companies (that is, EBITDA and net income higher than 0).
Renewable Energy Valuation Multiples
Overall, for 202 renewable energy companies, the average revenue multiple is 5.3x.
But what’s interesting is that the small companies with revenue less than $10 million have much higher revenue multiples than the larger companies.
The average revenue multiple for renewable energy companies with revenue less than $10 million is 7.4x whereas the average for the industry is 5.3x.
In fact, revenue multiple decreases as the company’s revenue increases.
The same trend exists for EBITDA multiples. Larger companies (i.e. increasing revenue size) have lower EBITDA multiples.
The average EBITDA multiple for 202 renewable energy companies is 18x, and it ranges from an average of 23x for the smallest companies to an average of 15x for the largest companies.
Interestingly, the smallest companies also have the highest average gross margin, EBITDA margin and net profit margin.
I would’ve thought that the smallest companies have not achieved economies of scale with high cost to set up the infrastructure, so they would have lower profit margins.
Let’s briefly look at a breakdown of companies operating in each type of renewable energy.
Hydro Renewable Energy Valuation Multiples
There are 79 hydroelectric renewable energy companies in the dataset.
The average revenue multiple for hydroelectric companies is ~5x.
The average EBITDA multiple for hydroelectric companies is ~17x.
The average earnings multiple for hydroelectric companies is ~28x.
Of the profitable companies, the profit margins are solid. The average gross margin for hydroelectric companies is 56% and the average net profit margin is 25%.
I don’t believe that the EBITDA margin is as high as the gross margin, because that means the operating cost is almost zero. So, the EBITDA margin is not very reliable in this dataset.
Solar Renewable Energy Valuation Multiples
There are 139 solar renewable energy companies in this dataset.
The average revenue multiple for solar energy companies is 5x.
The average EBITDA multiple for solar energy companies is 19x.
The average revenue multiple for solar energy companies is 35x.
Again, the EBITDA margin is too close to gross margin, so I don’t believe it is a reliable average.
Wind Renewable Energy Valuation Multiples
There are 103 wind renewable energy companies in this dataset.
The average revenue multiple for wind energy companies is 5x.
The average EBITDA multiple for wind energy companies is 17x.
The average revenue multiple for wind energy companies is 35x.
Same thing with unreliable EBITDA margins again as above.
Alternative Fuel Cell Renewable Energy Valuation Multiples
There are 46 wind renewable energy companies in this dataset.
The average revenue multiple for alternative renewable energy companies is 5x.
The average EBITDA multiple for alternative renewable energy companies is 18x.
The average revenue multiple for alternative renewable energy companies is 37x.
I don’t know what’s wrong with the EBITDA margins in this whole dataset. The EBITDA margins seem to be off again. They’re too close to the gross margin, and I don’t believe it is reliable.
Summary By Renewable Energy
Summarizing the average valuation multiples by type of renewable energy in the below table, the revenue multiple, EBITDA multiple and the earnings multiple are all in a similar range.
Revenue multiples are the highest for alternative cell renewable energy companies and the lowest for hydroelectric companies.
EBITDA multiples are the highest for solar energy companies and the lowest for wind energy companies.
The net profitability of the companies by renewable energy type is in a similar range but the highest for hydro and lowest for alternative cells.
How To Use Valuation Multiples To Value a Company
Now that you have the valuation multiple, how do you use it to value a company?
For those who are not familiar with using valuation multiples to value companies or those who are but need a refresher, I wrote posts detailing exactly how you can do that.
Hopefully you can use them as helpful guides. Click on the link below to go to the post.
- How to value a company based on revenue
- How to value a company based on EBITDA
- How to value a company based on earnings
- How to find your own valuation multiples
- Other posts on how to value a company
Download Data Set
To download the dataset of 202 companies in this analysis by renewable energy type, enter your email address below to sign-up for the mailing list and the data set will be sent to your email directly. Sometimes, it takes a few hours for the email to go through, so please be patient.
Thanks for reading as always and leave a comment if you found it useful!