Depending on how investors look at the situation, natural gas transportation fuels leader Clean Energy Fuels (NASDAQ:CLNE) is either oh-so-close to finally cashing in on its long-term potential or on the doorstep of a much worse fate. Considering shares have fallen almost 80% in the last three years, it may seem difficult to remain optimistic. But there are some rays of sunshine piercing through the dark clouds.

Management has made several difficult but necessary decisions to put the business on stable long-term footing. An important federal tax credit, although not currently active, is likely to be retroactively reinstated in future periods. And new commercial trucks utilizing cleaner-burning natural gas fuels are ready to hit the market. It could prove to be just the trifecta of catalysts Clean Energy Fuels needs to turn things around.

Or not.

It's not an easy question to answer, but investors want to know: Where will Clean Energy Fuels by in three years? Let's take a level-headed look at the path forward.

A truck refueling at a CNG refueling station.

Image source: Getty Images.

By the numbers

The full-year 2017 financial numbers weren't inspiring at first glance, but they require some further explanation. That's especially true of the enormous operating loss of $134 million -- more than the total from the three years spanning 2014 through 2016 combined. What happened?

Well, there were $61 million in asset impairments related to closing 42 fueling stations, repositioning its compressor business, and reducing headcount. Another $13.2 million charge was taken to adjust inventory, and yet another $7 million was spent settling disputes related to the company's low carbon fuel standard (LCFS) credits. The total charges were roughly $81 million.

That wasn't even all of it. Clean Energy Fuels went the entire year without generating any revenue from a federal tax credit on the sale of compressed natural gas (CNG) and liquefied natural gas (LNG), which expired on the last day of 2016. The absence wiped away about $26 million in cost-free revenue generated in the prior year.

With that context, here's how 2017 stacked up against 2016:

Metric

2017

2016

% Change

Total revenue

$341.6 million

$402.6 million

(15.2%)

Total volume sold, gasoline equivalent gallons

351.4 million

329.0 million

6.8%

Operating income

($134.5 million)

($17.6 million)

N/A

Net loss

($81.4 million)

($13.7 million)

N/A

Alternative fuels tax credit

$0

$26.6 million

(100%)

Source: SEC filing.

Now for some good news: Clean Energy Fuels should have put most of its asset impairments behind it. Since they were mostly related to the least profitable fueling stations in the company's network, that should result in an immediate improvement in margins for 2018.

Rising oil prices should also bode well for the natural gas transportation fuels supplier. In addition to higher selling prices, higher energy prices make CNG and LNG more cost competitive compared to diesel fuel, which could nudge more fleets to make the switch, thus increasing the customer pool. It's not the only potential catalyst capable of providing a much-needed boost to the business in the next several years.

Greener pastures ahead?

Management has worked to corral the factors within its control in recent years by focusing on the most profitable parts of the business and downsizing. However, much of Clean Energy Fuels' future might just depend on factors outside of the company's control -- and oil prices may not even the most significant factor for investors to consider.

The lowest hanging fruit for the business will come from the reinstatement of the federal alternative fuels tax credit (AFTC). While it wasn't active during 2017, it was retroactively reinstated in February 2018. As a result, Clean Energy Fuels expects to record an approximately $25 million gain in the first quarter of 2018 related to its fuel sales last year. But there's a catch: the AFTC isn't active right now, meaning fuel sales this year will miss out on the cost-free revenue provided by the tax credit.

The uncertainty isn't good for the business or investors, but it might not be so bad. Why not? The AFTC is now in the same situation as the biodiesel blender's tax credit, which was allowed to expire in 2010, 2012, 2014, 2015, and 2017. It was reinstated every single time. Investors can likely expect the same for the AFTC, while taking comfort in knowing Clean Energy Fuels isn't nearly as dependent on tax credits as biodiesel producers.

A straight line above a tangled line.

Image source: Getty Images.

However, while a cool $25 million boost to the bottom line from the AFTC each year will help, the business will ultimately succeed or fail with the pace of expansion in key markets -- and the clock is ticking. If natural gas transportation fuels don't begin to gain significant market share in commercial trucking applications, then they may lose out to electric vehicles for good.

Once again, there's some potentially good news. The first commercially available class 8 on-highway trucks to receive near-zero emissions certification by the California Air Resources Board (CARB) are hitting the road right now. No company is better positioned to exploit the opportunity than Clean Energy Fuels, which has a big operational footprint in California. If the new trucks gain traction quickly -- before electric trucks become viable within the next five years or so -- then the alternative fuels supplier could get a new lease on life.

That's not only true for the near term, but the long-term as well, as having real-world customers relying on natural gas fuels would go a long way to proving the reliability and utility of the technology. The United States has no shortage of natural gas, after all, and it would be possible for both electric trucks and natural gas trucks to share the road on the path to a lower-carbon future.

A drawing on a chalk board with question marks, problem solving, and a rocket ship icon on a bar chart.

Image source: Getty Images,

All the pieces are in place, but...

On one hand, investors should be pleased with the steps taken by management in recent years. The alarming rates of stock dilution are now a thing of the past, while difficult decisions have refocused the business on the most profitable and fast-growing opportunities.

On the other hand, a handful of significant factors that will likely make or break Clean Energy Fuels' future -- oil prices, the reinstatement of tax credits, and market penetration of natural gas semi trucks -- remain outside of the company's control. That's not an envious position to be in.

Mr. Market has almost no faith in the stock, which trades at just 0.65 times book value. While that may be fair in the historical context, it doesn't seem to fairly value the potential for a turnaround if commercial trucks really do gain market traction beginning in 2018. Will this time really be different? The answer will reveal itself soon enough, although opportunistic investors may find reason to stake a position in Clean Energy Fuels stock at these lowly prices. If it works out, then it'll likely lead to handsome rewards for patient investors.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Clean Energy Fuels. The Motley Fool has a disclosure policy.