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Stock Analysis & Ideas

New Fortress Energy: Massive Upside Potential

I am bullish on New Fortress Energy (NFE) as it looks attractively priced relative to its historical averages, Wall Street analysts are bullish on it, and its average price target implies substantial upside potential.

New Fortress Energy manages integrated gas-to-power energy infrastructures and has been operating in the industry since 1998. The company functions as a fully-integrated provider of natural gas-fueled energy solutions and is headquartered in the United States. NFE has been working toward replacing oil-based fuels with its environmentally responsible and carbon-free affordable power.

It offers LNG and targeted energy solutions to its customer base and has developed a well-established image in the market. The company now operates under New Fortress Energy Inc., which was formerly under the label New Fortress Energy LLC.

Strengths

With its successful track record of driving innovative solutions for its customers, New Fortress Energy has established an excellent rapport in the market. Compared to its competitors, the company has a strong brand name and reputation, allowing it to charge a relatively premium price compared to most of its competitors in the market.

Additionally, its diversified product offerings have also allowed the company to target vast customer segments within each market segment and further build its market leadership position. Its success with new product mixes and innovative solutions has also been added as its advantage in the industry.

Recent Results

In Q3 of 2021, which ended in September 2021, the company’s total cash and cash equivalents decreased to $224.4 million, which was at $601.5 million in December 2020. The revenues generated in the quarter reached $304.6 million, which was at $674.2 million in the nine months that ended in September 2021.

This led to the net loss for the quarter and the nine months, reaching $17.77 million and $59 million, respectively. The pro forma net loss attributable to stockholders for the quarter was $12.82 million. The basic and diluted net loss per share for Q3 2021 was $0.05.

Valuation Metrics

NFE stock looks undervalued here as it trades below its historical valuation multiple averages on a forward EV/EBITDA ratio basis and on a forward price-to-normalized-earnings basis. Its forward EV/EBITDA ratio is 11.7 times compared to its historical average of 16.1 times, and its forward price-to-normalized-earnings ratio is 12.5 times compared to its historical average of 98.6 times.

Moving forward, analysts expect EBITDA to increase by 30.4% and normalized earnings per share to increase by 178.2% over the next twelve months.

Wall Street’s Take

According to Wall Street analysts, NFE earns a Moderate Buy consensus rating based on one Buy and one Hold assigned in the past three months. Additionally, the average New Fortress Energy price target of $37 puts the upside potential at 66.4%.

Summary and Conclusions

NFE stock looks attractively priced based on numerous metrics. First of all, it trades at a discount to its historical valuation multiple averages, Wall Street analysts are generally bullish on it, and the average price target implies massive upside potential over the next twelve months.

That said, NFE operates in a sector that is highly volatile as it is heavily dependent on the state of the energy markets. As a result, investors should keep that risk in mind before taking a position. Overall, however, it looks like it might be an attractive time to add shares here.

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