As public and political assist for inexperienced energy has broadened, markets have come to count on a decadeslong renewables rollout. It’s onerous to see any catalyst for a change in sentiment, says

Sam Arie,

a veteran utilities analyst at UBS. Photo voltaic panels might be the most affordable technique to generate electrical energy in lots of elements of the world. “In some instances it’s even cheaper to construct a brand new photo voltaic farm than run present coal vegetation,” says

Alex Monk,

a portfolio supervisor at asset supervisor

Schroders.

The catch is that the shift to renewables doesn’t assure shareholder returns. To justify excessive valuations, traders want to make sure firms have a defensible enterprise in addition to development prospects.

Photo voltaic traders have already skilled at the very least two stomach-churning cycles. A key lesson has been that making panels themselves is a low-margin, hypercompetitive market greatest averted. However different elements of the worth chain supply higher prospects.

For instance,

SolarEdge

and

Enphase

make energy inverters, which convert a photo voltaic panel’s energy to alternating present and alter efficiency to maximise output. Their Nasdaq-listed shares have returned 179% and 444% respectively in the course of the previous yr and now commerce for 72 and 93 occasions ahead earnings. That’s a whole lot of development priced in. Nevertheless, the applied sciences are patent-protected and is also central to managing a wise dwelling’s energy between electrical automobiles, photo voltaic panels, batteries and the like—a probably huge market.

Builders are another choice. They bid for, construct and run photo voltaic farms. Whereas putting in the panels isn’t advanced, expertise is efficacious when pricing bids and navigating the allowing course of, and scale is essential to sourcing panels successfully.

NextEra Power,

NEE -1.93%

Enel

ENEL -2.50%

and

Iberdrola

IBDRY -1.86%

have constructed big renewable-power farms as a part of wider utility companies and have bold rollout plans for photo voltaic and wind. Their shares have given traders whole returns of between 16% and 28% over a yr, and now change fingers for between 15 and 32 occasions ahead earnings. Barclays utilities analyst

Dominic Nash

credit a part of the rise to basic development traders coming into the sector for the primary time.

Then there are U.S. residential builders, which supply owners rooftop solar-panels paired with battery storage. The merchandise present added reliability, and month-to-month funds for the price of batteries and photo voltaic panels which can be typically decrease than present utility payments. “It’s a fairly straightforward sale,” says

Stephen Byrd,

an analyst at Morgan Stanley.

Shares in

SunPower

SPWR 2.12%

and

Sunrun,

two such builders, commerce at Tesla-type multiples, 118 occasions and 360 occasions ahead earnings respectively. Revenues will develop—U.S. photo voltaic penetration will rise from 3% now to 14% by 2030, says Mr. Byrd—however margins may even come beneath stress as soon as installers compete head-to-head fairly than with incumbent utilities.

Traders want to decide on rigorously because the stock-market photo voltaic coaster hurries up once more. The overall route of journey could also be up, however it seemingly nonetheless has loads of twists and turns in retailer.

Write to Rochelle Toplensky at rochelle.toplensky@wsj.com