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Clean Energy Fuels: Can Renewable Interest Deliver?

I am neutral on Clean Energy Fuels (CLNE).

While it benefits from governmental and macroeconomic tailwinds, as well as a lengthy growth runway, the stock price is not compelling enough at the moment to make it look like a clear value.

Clean Energy Fuels is a California-based renewable energy company. It provides low, zero, and negative carbon renewable fuels. (See Insiders’ Hot Stocks on TipRanks)

The company focuses on providing renewable natural gas fuel to the U.S. and Canada, particularly the heavy-duty vehicle sector. Aside from its fueling services, Clean Energy Fuels also produces RNG from livestock waste, sells compressors and equipment, and more.

Strengths

The company has exhibited consistently positive performance when entering new markets, able to build and grow new revenue streams and diversify its brand portfolio.

It has a solid RNG station infrastructure that is easily modifiable, and ready to adapt to green hydrogen vehicles in the future.

Clean Energy Fuels also has an established and largely blue-chip customer base, counting Amazon (AMZN), UPS (UPS), and Waste Management (WM) among its clients. Moreover, it maintains strong partnerships with global energy leaders, including Chevron (CVX) and British Petroleum (BP).

Recent Results

The company reported a 13% growth in its RNG deliveries for the second quarter of 2021. It delivered a total of 101.4 million gallons this year, compared to just 89.5 million gallons in Q2 of last year.

Clean Energy Fuels attributed the increase largely to the lifting of COVID-19 pandemic restrictions that affected the travel and public transit customer markets.

Unfortunately, though, its revenue for Q2 of 2021 failed to break the million-dollar mark, totaling only around $500,000. This presents a 99.2% decrease from the company’s $59.9 million revenue from the same quarter in 2020, due to the Amazon warrant charges.

Not counting the $78.1 million in warrant charges and other unrealized losses from customer fueling contracts, the 2021 Q2 revenue should total $79 million, or an increase of 28.9% from the $61.3 million of last year.

Valuation Metrics

Clean Energy Fuels’ stock looks richly valued right now as its EV/EBITDA ratio indicates that the stock is trading above its historical average. The EV/EBITDA ratio is currently 27.2x compared to its five-year average of 18.6x.

That said, the company is expected to grow EBITDA by 9.5% in 2022, so the growth prospects are decent.

Wall Street’s Take

From Wall Street analysts, Clean Energy Fuels earns a Moderate Buy analyst consensus based on two Buy ratings, zero Hold ratings, and one Sell rating in the past three months. Additionally, the average Clean Energy Fuels price target of $11.67 puts the upside potential at 25.9%.

Summary and Conclusions

Clean Energy Fuels’ is not particularly attractive at the moment, though it also is not extremely expensive either. The stock looks a bit pricey compared to its historical levels, but forward growth expectations are strong and Wall Street analysts lean bullish on it.

The company benefits from a long-term bullish growth outlook for clean energy, and is based in a state whose government and culture are strongly supportive of renewable energy.

Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.

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