Is Clean Energy Fuels Corp. Destined for Greatness?

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Clean Energy Fuels (CLNE -2.97%) fit the bill? Let's look at what its recent results tell us about its potential for future gains.

What we're looking for
The charts you're about to see tell Clean Energy Fuels' story, and we'll grade the quality of that story in several ways:

• Growth: are profits, margins, and free cash flow all increasing?
• Valuation: is share price growing in line with earnings per share?
• Opportunities: is return on equity increasing while debt to equity declines?
• Dividends: are dividends consistently growing in a sustainable way?

What the numbers tell you
Let's look at Clean Energy Fuels' key statistics:

CLNE Total Return Price data by YCharts.

Source: YCharts. * Period begins at end of Q4 2010.

CLNE Return on Equity (TTM) data by YCharts.

Source: YCharts. * Period begins at end of Q4 2010.

How we got here and where we're going
Clean Energy Fuels' performance has deteriorated since last year, as the supplier of natural gas for vehicles lost three of the passing grades it picked up in 2013 to finish with a score of two out of seven possible passing grades today. However, one of those passing grades was only awarded because the crash in Clean Energy's net income has been steeper than the decline in free cash flow -- but nominal free cash flow has been persistently lower than net income for Clean Energy Fuels for years. This bottom-line collapse has hurt Clean Energy on several metrics it cleared last year, so reversing this slide will be critical to improving the company's fortunes the next time we examine it. Will Clean Energy be able to rebound this year? Let's dig a little deeper to see.

Shares of Clean Energy had lost nearly a third of their already-depressed value since the end of 2013. The company has endured slowing adoption rates of natural-gas engines by truck and fleet operators, a problem occasionally pinned on lack of availability. In its fourth-quarter earnings results, Clean Energy Fuels disappointed on both the top and bottom lines amid rising natural-gas prices, which made it less viable for potential customers to switch from gasoline or diesel fuel to natural gas. However, some of that slide has been halted, as Clean Energy on Friday reported a big jump in fuel deliveries for its first quarter. This isn't translating to profitability just yet, since the company can no longer record millions of dollars in tax credits as revenue, but investors are still eager to grasp any piece of good news they can find.

Motley Fool energy specialist Jason Hall notes that Clean Energy should soon face competition from TravelCenters of America (TA), which has partnered with Royal Dutch Shell to add liquefied natural gas, or LNG, fueling terminals to 100 of its locations. Integrys Energy Group (NYSE: TEG) and privately held Love's also continue to expand their compressed natural gas, or CNG, fueling stations, but they're not quite near Clean Energy's size yet -- Integrys subsidiary Trillium CNG delivered roughly half the nat-gas gallons for all of 2013 as Clean Energy did in its latest quarter.

Clean Energy is fighting back with plans to open two or three new stations every month with partner Pilot Flying J, the largest operator of truck stops in the U.S. Fool analyst Jason Moser notes that the company should reach profitability soon as it continues to build out America's natural-gas highway infrastructure, which he believes will provide a competitive edge over smaller rivals. Cummins and Westport Innovations' (WPRT 0.26%) joint nat-gas engine-building venture is also expected to ship over 10,000 unit of ISX12 G heavy duty natural-gas engines this year, which could create 200 million gallons of new nat-gas fueling opportunity for Clean Energy.

Clean Energy also recently signed a long-term deal to supply natural gas to package-delivery giant UPS' private fueling stations in Texas. My fellow writer Reuben Brewer notes that companies such as CSX and Waste Management are also switching away from diesel to cut fuel costs, which are always going to weigh heavily on any transport-focused company's profitability. Clean Energy Fuels forecasts that conversion from diesel to natural gas for medium- and long-haul trucks could be worth $25 billion over the next few years, and the U.S. Energy Information Administration anticipates a 56% rise in natural gas from 2012 to 2014 as well. The latter trend should offset the former and help keep nat-gas prices low, to Clean Energy's benefit.

Putting the pieces together
Clean Energy Fuels today has few of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy -- or to stay away from a stock that's going nowhere.