Boralex

HI Abbas,

Boralex actually has a slowing growth profile which is why you are seeing its valuations come down vs historical averages. We would never replace BLX with BEP because BEP is in our opinion best in class which is why it is a foundational stock (not a Growth Bull List stock). It is more defensive than Boralex simply because of its size and the fact it is the largest renewable company.

Now, that doesn't mean we can't independent add Boralex to the growth list. It is down by around 25% this year (only INE is lower) and its underperformance is likely a result of its size. INE and BLX are the smallest and thus, will bring additional volatility.

Boralex is also more expensive than the majority of its peers. Whether you look at P/E, forward P/E, PS, EV/EBITDA, P/FCF - Boralex is in the top range in terms of valuations. BEP, NPI, INE, AQN are all cheaper than Boralex. Furthermore, AQN and INE both have higher expected earnings and revenue growth rates than BLX, which is middle of the pack. It used the be the fastest growing - which is why it commanded those higher multiples. Now, it is no longer the fastest growing and as such, not sure it deserves to be growing at a premium to some of the others.

Finally, in a rising rate environment - the bigger you are the better as you will get better rates on borrowing. Boralex is likely to have higher borrowing costs than a company like BEP which is 3 times its size. This may stunt growth and will have a greater impact on smaller companies.

All things to consider. Not saying it is a bad company, but would not swap it out for BEP as a foundational stock. It could make its way to one of our others lists at some point down the road.

Mat