Small Cap Gevo, Inc (GEVO) Still Can’t Turn a Profit on Overpriced Biofuel (KIOR, SZYM & SYNM)

As a new Government Accountability Office (GAO) report comes out about wasteful spending on biofuels, small cap renewable biofuel stock Gevo, Inc (NASDAQ: GEVO) reported earnings that came in below expectations - meaning its worth taking a closer look at the GAO report, the stock and the performance of KiOR Inc (NASDAQ: KIOR), Solazyme Inc (NASDAQ: SZYM) and Syntroleum Corp (NASDAQ: SYNM).

What Is Gevo, Inc?

Small cap Gevo, Inc is a leading renewable chemicals and advanced biofuels company that has developed bio-based alternatives to petroleum-based products using a combination of synthetic biology and chemistry. More specifically, Gevo, Inc is converting existing ethanol plants into biorefineries to make renewable building block products for the chemical and fuel industries. The company plans to convert renewable raw materials into isobutanol (its versatile platform chemical for the liquid fuels and petrochemical market) and renewable hydrocarbons that can be directly integrated on a "drop in" basis into existing chemical and fuel products to deliver environmental and economic benefits. 

As for potential renewable biofuel stocks or peers, KiOR Inc is a "next-generation" renewable fuels company that has developed a proprietary technology platform to convert biomass into renewable crude oil that is processed into gasoline, diesel and fuel oil blendstocks; Solazyme Inc is the pioneer of an industrial biotechnology platform that harnesses the prolific oil-producing ability of microalgae though the use of standard industrial fermentation equipment to efficiently scale and accelerate the microalgae's natural oil production time to just a few days; and Syntroleum Corp is a producer of synthetic fuels from a wide variety of feedstock (from natural gas to fats, oils and greases) using the Fischer-Tropsch process to produce significant amounts of synthetic diesel and jet fuel as well as its Bio-Synfining® technology to produce renewable synthetic fuels with the same superior qualities.

What You Need to Know or Be Warned About Gevo, Inc?

The Washington Free Beacon has noted that the GAO recently issued a report saying that a Pentagon official has reported paying "about $150 per gallon for 1,500 gallons of alternative jet fuel derived from algal oil." The price for conventional jet fuel is currently $2.88 per gallon while the GAO's report further reveals that federal agencies have paid significantly higher prices in an effort to promote biofuels in commercial and military aviation.

Its worth mentioning that the Washington Free Beacon also noted a Reuters report from 2012 that the Air Force had purchased 11,000 gallons of alcohol-based jet fuel for $59 per gallon from Gevo Inc which was backed financially by high-dollar Democratic donor Vinod Khosla who has invested in a number of companies receiving federal support from the Obama administration.

With that in mind, Gevo Inc reported first quarter 2014 revenues of $0.9 million verses $3.5 million in the same period in 2013 because the company recognized $2.4 million in revenue a year ago associated with the sale of excess corn inventory. The net loss came in at $12.0 million verses $18.4 million during the same period in 2013 while cash and cash equivalents at the end of the quarter stood at $8.4 million. However and earlier in the month, Gevo Inc announced the closing of a private debt financing with Whitebox Advisors LLC consisting of a senior secured term loan exchangeable into senior secured convertible debentures with the aggregate proceeds being $25.9 million with an option for the company to draw an additional $5.2 million if certain conditions are met.

The earnings report also noted that on May 5th, Gevo Inc successfully started up the Side-by-Side operation at its plant in Luverne, MN, and currently has three of four fermenters actively producing ethanol with the CEO commenting:

"The start-up is going well and we are running at a rate of 30,000 gallons per day, and by next week we expect to be at our target rate of more than 40,000 gallons per day. Our target run rate for ethanol is greater than 15 million gallons per year."

Nevertheless, Gevo Inc's long term financials do not inspire much confidence as the company has reported revenues of $8.22M (2013), $24.39M (2012), $64.55M (2011) and $16.40M (2010) along with net losses of $66.81M (2013), $60.71M (2012), $48.21M (2011) and $40.11M (2010) for the past four years.

Share Performance: Gevo, Inc vs. KIOR, SZYM & SYNM

On Wednesday, small cap Gevo Inc closed at $1.02 (GEVO has a 52 week trading range of $0.73 to $2.32 a share) for a market cap of $69.91 million plus the stock is down 28.2% since the start of the year, down 41.4% over the past year and down 93.9% since February 2011. Here is a look at the long term performance of Gevo Inc verses the performance of renewable biofuel stocks KiOR Inc, Solazyme Inc and Syntroleum Corp:

As you can see from the above chart, investors would have been better off investing in traditional oil or energy stocks.

Finally, here is a look at the latest technical charts for Gevo Inc, KiOR Inc, Solazyme Inc and Syntroleum Corp:

The Bottom Line. Even with the US government as a customer paying inflated prices, small cap renewable biofuel stock Gevo Inc is still not profitable while its share performance along with that of KiOR Inc, Solazyme Inc and Syntroleum Corp is nothing to be exited about – meaning most investors will want to stick with traditional oil and gas stocks.