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Congress Just Handed This Company a $205 Million Windfall. Is Its Stock a Buy?

Tags: energy stock
DATE POSTED:April 16, 2018

One dollar per gallon here, one dollar per gallon there can really add up in the 2.5-billion-gallon biodiesel industry. That's because the Biodiesel Mixture Excise Tax Credit (BTC) provides a $1 per-gallon subsidy to the first company that blends biomass-based diesel with petroleum-based fuel, which is usually the company that produced the biodiesel. Er, that's how it's supposed to work anyway, but the subsidy has become a bit of a budgeting and political football for Uncle Sam, as evidenced by its being allowed to expire in 2010, 2012, 2014, 2015, and 2017. 

The bad news is, the tax-credit reversals have resulted in a healthy dose of uncertainty for the renewable fuel industry. The good news is, the BTC has been retroactively reinstated every time it's been allowed to expire. The awesome news: A continued focus on long-term growth has made that more valuable to Renewable Energy Group (NASDAQ: REGI) each time.

Case in point: After Congress retroactively reinstated the 2017 BTC on Feb. 9, the nation's largest biodiesel producer learned it would collect a cool $205 million windfall. Does that make Renewable Energy Group stock a buy? 

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Tags: energy stock