Is the ethanol industry ready to soar?

The ethanol industry is not a headline maker, but it is making investors plenty of money. How do 1,500% gains sound?

Baltimore – (TFN): The ethanol industry is having yet another good day. After near political abandonment, the nation’s biofuel sector reeled from the pain of a wave of bankruptcy filings earlier this year.

But now, thanks to some more political maneuvering the industry is once again finding itself on the leader board.

Should you get used to it?

Before we answer that question, let’s look at the catalyst for the action. Today was supposed to be the EPA’s deadline for a decision that would allow gasoline blends to contain up to 15% ethanol versus the 10% cap now in place.

But word this morning says the EPA is not ready to make its decision quite yet. It now wants to make the decision by sometime next summer. Judging by the day’s pricing action, the Street views this as a positive sign.

Companies across the industry are eager to push more of their product into the nation’s fuel source.

One of the big winners today is Pacific Ethanol (NASDAQ:PEIX), the once highly touted California-based producer with subsidiaries in and out of bankruptcy court over the past year.

Word that more ethanol production may be around the corner was enough for the company to pull the mothballs out of its Burley, Idaho production facility by January. The company owns a total of four production facilities, only one of which is currently operating.

If the word from the EPA is positive, expect shares to continue to climb. As I write, traders are getting in (and out) at $0.87, up 56% on the day.

Not a solo player

Two more companies worth mentioning are Green Plains Renewable Energy (NASDAQ:GPRE) and BioFuel Energy (NASDAQ:BIOF). Thanks to today’s action, shares of the two ethanol producers are up by 12% and 22%, respectively.

Today’s action, while eye-catching, is nothing out of the ordinary for this industry. Just look at Green Plains’ movement over the past nine months.

In March, like most stocks, the company’s valuation struck a new low of $1.12. Today, those same shares are trading for $12.90, a gain of 1,050%.

While adding another $11 to share price is unlikely, there is plenty of upside left in Green Plains and the ethanol industry. As the economy levels out and variables become certainties, producers will find their optimum scale and maximize their margins and profit potential.

While March would have been the best time to buy, today’s not too bad either.

source: todaysfinancialnews