Cardinal Ethanol, LLC (CRDE) Stock Analysis

Cardinal Ethanol, LLC (CRDE) Materials & Commodity Exposure

Cardinal Ethanol, LLC, established in 2005, is a US-based producer of fuel-grade ethanol and related products like distiller grains, corn oil, and carbon dioxide. It serves as an octane enhancer, oxygenated fuel additive, and gasoline substitute, marketing its products directly and through third-party brokers, with a focus on domestic and export markets.

What Is the Investment Thesis for CRDE?

Cardinal Ethanol, LLC presents an investment opportunity within the renewable fuels sector, driven by a P/E ratio of 3.97 and a profit margin of 13.9%. Growth catalysts include increasing demand for ethanol as a gasoline additive and biofuel. The company's diversified product portfolio, including distiller grains and corn oil, provides revenue streams beyond ethanol. However, investors may want to evaluate risks such as fluctuating corn prices, regulatory changes impacting ethanol mandates, and competition from larger ethanol producers. The company's beta of -0.49 suggests lower volatility compared to the overall market.

Based on FMP financials and quantitative analysis

CRDE Key Highlights

Cardinal Ethanol, LLC has a market capitalization of $278M, reflecting its position in the ethanol production market.

• The company's P/E ratio of 3.97 indicates a potentially undervalued stock compared to its earnings.
• A profit margin of 13.9% demonstrates the company's ability to generate profits from its operations.
• Cardinal Ethanol's gross margin of 15.1% reflects its efficiency in converting revenue into profit after accounting for the cost of goods sold.
• The company's beta of -0.49 suggests that the stock is less volatile than the overall market.

Who Are CRDE's Competitors?

CRDE is benchmarked below against 8 industry peers on price, market cap, and our AI MoonshotScore.

AI Score by Stock Expert AI · Price data: FMP / Yahoo Finance

What Are CRDE's Key Strengths?

Established ethanol production facilities.

• Diversified product portfolio (ethanol, distiller grains, corn oil).
• Strategic location in a corn-producing region.
• Existing relationships with fuel blenders and distributors.

What Are CRDE's Weaknesses?

Dependence on corn prices.

• Vulnerability to regulatory changes in the biofuel industry.
• Limited geographic diversification.
• Smaller scale compared to major ethanol producers.

What Could Drive CRDE Stock Higher?

Government support for renewable fuels through mandates and incentives.

• Increasing demand for ethanol as a gasoline additive.
• Potential expansion of ethanol production capacity.
• Diversification into advanced biofuels production.
• Growth in the animal feed market driving demand for distiller grains.

What Are the Key Risks for CRDE?

Weak fundamentals — a Piotroski F-Score of 3/9 flags soft profitability, leverage or efficiency.

• Fluctuations in corn prices impacting profitability.
• Changes in government regulations and biofuel mandates.
• Competition from larger ethanol producers.
• Technological advancements in alternative fuels.
• Limited liquidity due to OTC market trading.

What Are the Growth Opportunities for CRDE?

• Expansion of Ethanol Production Capacity: Cardinal Ethanol can increase its ethanol production capacity to meet growing demand for biofuels. The global biofuels market is projected to reach $214.24 billion by 2031, growing at a CAGR of 5.7% from 2022 to 2031. By expanding its production capacity, Cardinal Ethanol can capture a larger share of this growing market. This expansion can be achieved through strategic investments in new facilities or upgrades to existing infrastructure, with a potential timeline of 3-5 years for significant capacity increases.
• Diversification into Advanced Biofuels: Cardinal Ethanol can diversify its product portfolio by investing in the production of advanced biofuels, such as cellulosic ethanol. The advanced biofuels market is expected to grow significantly due to its lower carbon footprint and use of non-food feedstocks. This diversification can provide Cardinal Ethanol with a competitive advantage and access to new markets, with a potential timeline of 5-7 years for commercial-scale production.
• Increased Production and Sales of Distiller Grains: Cardinal Ethanol can increase its production and sales of distiller grains, a valuable animal feed supplement. The global animal feed market is projected to reach $432.7 billion by 2028, growing at a CAGR of 3.5% from 2021 to 2028. By expanding its distiller grains production and marketing efforts, Cardinal Ethanol can tap into this growing market and diversify its revenue streams. This expansion can be achieved through optimizing production processes and expanding distribution networks, with a potential timeline of 2-3 years for significant sales increases.
• Development of Carbon Capture and Storage (CCS) Technology: Cardinal Ethanol can invest in the development and implementation of CCS technology to capture and store carbon dioxide emissions from its ethanol production process. This can reduce the company's carbon footprint and potentially generate revenue through carbon credits. The global CCS market is expected to grow significantly due to increasing focus on climate change mitigation, with a potential timeline of 3-5 years for implementing CCS technology at its facilities.
• Expansion into Export Markets: Cardinal Ethanol can expand its presence in export markets to capitalize on growing demand for ethanol and related products in countries with supportive biofuel policies. The global ethanol market is influenced by various government mandates and incentives, creating opportunities for ethanol exports. By establishing strategic partnerships and distribution networks in key export markets, Cardinal Ethanol can diversify its customer base and increase its revenue, with a potential timeline of 2-4 years for establishing a significant presence in new export markets.

What Are CRDE's Competitive Advantages?

• Established production facilities with capacity to meet market demand.
• Access to corn supply through proximity to agricultural regions.
• Relationships with fuel blenders and distributors.
• Diversified product portfolio including ethanol, distiller grains, and corn oil.

What Does CRDE Do?

Cardinal Ethanol, LLC, originally incorporated as Indiana Ethanol, LLC in 2005 before rebranding later that year, operates as a producer and supplier of ethanol and related products. Headquartered in Union City, Indiana, the company focuses on the production of fuel-grade ethanol, which is used as an octane enhancer in fuels, an oxygenated fuel additive to reduce emissions, and as a non-petroleum-based gasoline substitute. In addition to ethanol, Cardinal Ethanol produces distiller grains, a valuable animal feed supplement for the dairy, beef, poultry, and swine industries. The company also produces corn oil, which is used as a feed ingredient, a feedstock for biodiesel production, and for other industrial applications. Furthermore, Cardinal Ethanol captures and sells raw carbon dioxide gas. The company markets and distributes its products directly, as well as through third-party brokers, and also exports its products, serving a diverse range of customers in the continental United States and beyond.

What Products and Services Does CRDE Offer?

• Produces fuel-grade ethanol for use as an octane enhancer.
• Manufactures ethanol as an oxygenated fuel additive to reduce emissions.
• Offers ethanol as a non-petroleum-based gasoline substitute.
• Produces distiller grains for animal feed supplement.
• Manufactures corn oil for feed ingredient and biodiesel feedstock.
• Captures and sells raw carbon dioxide gas.

How Does CRDE Make Money?

• Produces and sells fuel-grade ethanol to fuel blenders and distributors.
• Generates revenue from the sale of distiller grains to animal feed producers.
• Sells corn oil to biodiesel producers and industrial users.
• Markets and distributes carbon dioxide gas to various industries.

What Industry Does CRDE Operate In?

Cardinal Ethanol, LLC operates within the chemicals industry, specifically focusing on ethanol production. The industry is influenced by government mandates, such as the Renewable Fuel Standard (RFS), which drives demand for ethanol as a biofuel. The competitive landscape includes larger ethanol producers and agricultural commodity companies. Market trends include increasing demand for sustainable fuels and the development of advanced biofuels. The ethanol market is subject to fluctuations in corn prices and regulatory changes, impacting profitability and market dynamics.

Who Are CRDE's Key Customers?

• Fuel blenders and distributors who use ethanol as a gasoline additive.
• Animal feed producers who use distiller grains as a feed supplement.
• Biodiesel producers who use corn oil as a feedstock.
• Industrial users who purchase carbon dioxide gas.

The most recent 5 insider filings for Cardinal Ethanol, LLC break down as 1 sales and 4 purchases. On net that is roughly 607K shares acquired (about $320K) — insiders putting money in tends to read as conviction.

Cardinal Ethanol, LLC's Piotroski F-Score is 3/9, a 9-point checklist of profitability, leverage and efficiency — flagging fundamental weakness worth scrutiny. Its Altman Z-Score of 4.33 places it in the safe zone, indicating low near-term bankruptcy risk.

Return on equity for Cardinal Ethanol, LLC stands at 43.7%, a gauge of how efficiently it converts shareholder capital into profit. Return on assets is 30.0%, showing how much profit it generates from its asset base. CRDE trades at a trailing price-to-earnings ratio of 3.97, below the Basic Materials sector average of ~21.40x. Its free cash flow yield is 20.0%, a gauge of the cash the business throws off relative to its market value. A current ratio of 4.65 indicates the company holds enough short-term assets to cover its near-term obligations. Its earnings yield is 25.2%, the inverse of the P/E and a quick read on earnings relative to price.

Cardinal Ethanol, LLC (CRDE) Valuation Context

Valued at $278M, CRDE is classified as a micro-cap stock.

CRDE Revenue & Earnings Trend

In Q3 FY2024, CRDE generated $83.8M in top-line revenue, marking a sequential increase of 5.5%. The company recorded net income of $5.4M, with diluted EPS of $369.34.

Company Profile

Cardinal Ethanol, LLC operates in the Chemicals industry within the Basic Materials sector. It is headquartered in Union City, US. The company is led by CEO Tom Ranallo. CRDE has traded publicly since 2011.

CRDE Financials

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Disclaimer: This content is for informational purposes only and does not constitute investment advice. Always do your own research and consult a financial advisor.

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