Ameresco has gotten torched over the last six months - since January 2025, its stock price has dropped 37.9% to $15.60 per share. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Ameresco, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Ameresco Not Exciting?
Even though the stock has become cheaper, we're sitting this one out for now. Here are three reasons why there are better opportunities than AMRC and a stock we'd rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Ameresco’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 6.1% over the last two years was well below its five-year trend. 
2. Cash Burn Ignites Concerns
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Ameresco’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 30.8%, meaning it lit $30.75 of cash on fire for every $100 in revenue.
3. Short Cash Runway Exposes Shareholders to Potential Dilution
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Ameresco burned through $354.5 million of cash over the last year, and its $1.78 billion of debt exceeds the $71.59 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.
Unless the Ameresco’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.
We remain cautious of Ameresco until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.
Final Judgment
Ameresco isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 14.5× forward P/E (or $15.60 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Would Buy Instead of Ameresco
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