What happened

Shares of Renewable Energy Group (NASDAQ:REGI) lost more than 17% last month, according to data provided by S&P Global Market Intelligence. The nation's largest producer of biodiesel reported full-year 2018 operating results in March, although the numbers actually highlighted a strong performance last year. In fact, the business is now solidly profitable without help from an important federal subsidy for biodiesel fuels, marking an important inflection point for the company and its shareholders.

Making the stock's slide all the more perplexing is the fact that there are multiple catalysts just over the horizon for diesel, biodiesel, and renewable diesel products -- all manufactured or distributed by Renewable Energy Group -- both domestically and internationally. It seems likely that shares were simply continuing to cool off after an epic run in 2018 that delivered 118% gains to investors.

A chart on a chalkboard showing a steady rise and a sudden fall.

Image source: Getty Images.

So what

Renewable Energy Group reported adjusted EBITDA of $138.9 million in 2018, compared to $25.3 million in the year-ago period. Those numbers exclude revenue from the blenders tax credit (BTC), which provided an additional $205 million in profit from operations in 2017. The BTC would have provided a windfall of $237 million in 2018, but it wasn't in effect. Nonetheless, if it's retroactively reinstated by Congress in the future, then that's the amount the business would receive.

The important takeaway is that the business is no longer reliant on the federal subsidy. An 11% increase in gallons sold and a $107 million decrease in cost of goods sold combined to deliver a healthy bump in profits in 2018. The momentum should easily continue in the year ahead.

Diesel prices are at multiyear highs in early 2019, significant low-carbon fuel mandates will go into effect in multiple states in the next few years, and global demand for low-sulfur diesel fuels could increase by 12 billion gallons per year thanks to a new maritime shipping fuel standard coming in 2020.

Now what

Despite a sour start to the year, shares of Renewable Energy Group are sitting on a one-year gain of 65%. The stock is also fairly attractive right now, trading at just 11 times future earnings, which compares quite favorably to the S&P 500's cyclically adjusted earnings ratio of 31. Given the strength of operations, healthy selling prices, and multiple demand-spurring catalysts on the horizon, investors with a long-term mindset might want to give this stock a closer look after its double-digit drop in March.