Is Clean Energy Fuels Corp. Destined for Greatness?

Let's see what the numbers say about Clean Energy Fuels.

May 29, 2014 at 2:00PM

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 (NASDAQ:CLNE) 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 Chart

CLNE Total Return Price data by YCharts.

Passing Criteria

3-Year* Change

Grade

Revenue growth > 30%

66.4%

Pass

Improving profit margin

(1,496.6%)

Fail

Free cash flow growth > Net income growth

(77.4%) vs. (2,557.5%)

Pass

Improving EPS

(610%)

Fail

Stock growth (+ 15%) < EPS growth

(32.8%) vs. (610%)

Fail

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

CLNE Return on Equity (TTM) Chart

CLNE Return on Equity (TTM) data by YCharts.

Passing Criteria

3-Year* Change

Grade

Improving return on equity

(1,450%)

Fail

Declining debt to equity

673.1%

Fail

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 (NYSE: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' (NASDAQ:WPRT) 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.

3 stock picks to ride America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Clean Energy Fuels, Cummins, United Parcel Service, Waste Management, and Westport Innovations. The Motley Fool owns shares of CSX, Cummins, Waste Management, and Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers