Green Daily

Pacific Ethanol

Ethanol is an industry under significant stress as corn prices continue to rise and ethanol prices fall. Barriers to entry in the ethanol market are low because plants are relatively inexpensive and easy to build. Also, right now the federal government heavily subsidizes ethanol to keep its price competitive with regular gasoline. If those subsidiaries drop, prices would go up and ethanol will look like an unattractive alternative. So it's a risky bet, but if you are a believer in ethanol's future Pacific Ethanol is your best bet.

Pacific Ethanol's strategy is to focus on the West Coast market and build its plants near there. Right now the company is well-capitalized because of an investment by Cascade Investment and it has almost no long term debt, but that could change as it starts to build new plants.

As of close on Friday it's stock sold for $6.62. Analysts target estimates for this stock range from $7.77 to about $12. It's low stock price in 2007 was $6.11 (in November) and it's high $17.03 (in March). So, I'm not saying you would have made money on this stock in 2007. As all pure plays in the U.S. green marketplace, the company is not yet making a profit and was beaten down this year as the U.S. stock market corrected.