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Clean Energy Fuels: Good Growth Potential, Inconsistent Profitability
Stock Analysis & Ideas

Clean Energy Fuels: Good Growth Potential, Inconsistent Profitability

Clean Energy Fuels (CLNE) is a distributor of natural gas with operations in the U.S. and Canada. The company supplies compressed natural gas, LNG, and renewable natural gas as an alternative fuel for vehicles, with target markets including airports, public transit, heavy-duty trucking, institutional energy users, and government fleets.

I am neutral on Clean Energy Fuels as its optimistic growth outlook and strong Wall Street backing are largely offset by its spotty track record of profitability and unfavorable valuation multiples. (See Analysts’ Top Stocks on TipRanks)

Strengths

Clean Energy Fuels is committed to the environment and is dedicated to providing low- and zero-carbon fueling solutions with its renewable natural gas, which it sources from livestock manure and landfills.

The company is a pioneer of RNG as a vehicle fuel in North America and remains the biggest provider of RNG for the region’s transportation industry.

Recent Results

During the third quarter ended September 30, 2021, Clean Energy Fuels incurred a loss of $8 million, attributed chiefly to increased development expenses and other costs incurred in increasing the levels of their mixed earth elements production in Utah.

Total revenues for the nine months ended September 30, 2021, were $1.52 million compared to $1.27 million for the same period last year. Basic and diluted loss was ($0.21) per share compared to the previous period’s ($0.19).

Clean Energy Fuels has reported several highlights in its Q3 2021 report. These include seeking out term contract opportunities to supply its company-produced uranium to nuclear utilities while also figuring out how much potential there is to sell some inventory on the spot market.

The company is also in discussion with global suppliers of natural monazite ore in order to supply feed for its REE initiative, which is expected to produce separated REE oxides in the future if the market conditions remain favorable.

It also reported the establishment of its San Juan County Clean Energy Foundation, a fund that supports the local communities, including tribal communities in White Mesa in southeast Utah.

The company’s balance sheet showed a working capital of $132.8 million, including cash & marketable securities worth $100.8 million and inventory of $29.3 million. The company reports it will continue to find innovative opportunities to generate free cash flow and increase shareholders’ value.

Valuation Metrics

Clean Energy Fuels’ stock looks a little expensive at the moment. Despite its forward enterprise-value-to-EBITDA ratio being only 17.4x compared to its five-year average of 18.6x, its price-to-normalized-earnings ratio is a whopping 232x, and the company has a spotty record of profitability.

Meanwhile, growth is expected to be robust, with EBITDA poised to grow by 32.2% in 2021 and 8% in 2022.

Wall Street’s Take

Turning to Wall Street, Clean Energy Fuels earns a Moderate Buy consensus rating based on two Buys 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 95.5%.

Summary and Conclusion

Clean Energy Fuels is a player in a critical field. While renewable energy gets a lot of hype, natural gas is poised to be the key energy transition fuel source given that it is relatively clean, in abundant supply, and inexpensive.

As a result, Clean Energy Fuels is poised to enjoy robust demand in the coming years and should see solid growth as a result. Wall Street analysts are quite bullish on the stock, and the consensus price target implies massive upside over the next year.

That said, investors should keep in mind that the company has a spotty track record of profitability and trades at a high earnings multiple. Therefore, it is somewhat speculative.

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

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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