Why Alto Ingredients Remains Unprofitable Despite Market Leadership

Alto Ingredients ALTO, despite being the leading producer and distributor of specialty alcohols, renewable fuels and essential ingredients in the United States, is yet to be profitable. As a commodity-linked business, ALTO is highly sensitive to ethanol price movements, corn input costs and demand from fuel blenders and industrial end markets. Sales declines have been evident across all major segments, including the Pekin Campus, Marketing and Distribution, and Western Production operations.

Alto Ingredients has idled or exited underperforming facilities and low-margin contracts to preserve liquidity and stabilize profitability, resulting in revenue contraction.

The debt level is high that induces higher interest. The company has also incurred asset impairment charges as well as acquisition-related expense. All these together have been weighing on profitability over the last few years. ALTO has been incurring losses since 2022.

Nonetheless, Alto Ingredients’ turnaround strategy is encouraging. It is streamlining cost structure, exiting unprofitable activities and prioritizing capital investments with near-term visibility.

Its strategic focus includes lowering carbon intensity scores to benefit from the federal Section 45Z clean fuel tax credit program.  If targeted carbon intensity reductions are achieved and credits are effectively monetized, Section 45Z could provide up to $18 million in incremental gross benefit during 2025–2026.

Alto Ingredients is also expanding carbon dioxide capture and utilization at its Pekin and Columbia facilities, building on the Carbonic acquisition. By monetizing fermentation-derived carbon dioxide, the company is adding a higher-margin revenue stream that supports sustainability goals and further diversifies earnings. 

What About Its Peers?

Green Plains Inc. GPRE has experienced uneven profitability. Green Plains is reshaping its business mix toward higher-margin protein and renewable ingredients, which has weighed on short-term sales but is expected to improve stability. Green Plains aims to reduce exposure to ethanol cyclicality through diversification.

Gevo, Inc. GEVO remains unprofitable given its investments in sustainable aviation fuel and renewable hydrocarbons. GEVO’s profitability depends on locking offtake agreements and project financing. GEVO is expected to remain unprofitable this year as well. 

ALTO’s Price Performance

Alto Ingredients has gained 45.3% in a year, outperforming the industry.

ALTO’s Expensive Valuation

The stock is overvalued compared with its industry. It is currently trading at a price-to-earnings multiple of 17, higher than the industry average of 16.9.  

No Estimate Movement for ALTO

The Zacks Consensus Estimate for ALTO’s fourth-quarter 2025 EPS witnessed no movement in the last 30 days. The consensus estimates for 2025 and 2026 earnings also witnessed no movement in the last 30 days.
 

The consensus estimate for ALTO’s 2026 revenues and earnings indicates a year-over-year increase.  ALTO stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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This article originally published on Zacks Investment Research (zacks.com).

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