Welcome to "Stock Smackdown," where two of your favorite stocks go head to head in a battle for superiority. They'll be judged on a series of straightforward statistics, but we'll also dig into each company's key initiatives and long-term goals to determine how much upside there might be if all goes well. The winner will be the stock that racks up the most points at the end of the competition.
Now, let's go to ringside and meet our two combatants, Westport Innovations
In this corner…
These two companies are on the vanguard of a potential natural gas transportation boom. The Fool's covered the nat-gas industry from multiple perspectives, and many Fools predict long-term divergence between cheap natural gas and costly oil. Here are a few primers:
- Travis Hoium's "No End in Sight for Cheap Natural Gas"
- Brian Stoffel's "What's the Big Deal About Natural Gas, Anyway?"
- Austin Smith's "The No-Brainer Natural Gas Investment?"
Westport Innovations is known for its natural gas engine conversions. It has key licenses and partnerships with some of the transportation and construction industry's largest manufacturers, including Ford
Westport may not get far without Clean Energy Fuels' proposed natural gas highway, which would create a national network of fueling stations for long-haul trucking. Clean Energy also indirectly supports Westport through its partnership with truck builder Navistar
Baseline battle
We use many different numbers and ratios when talking about the value of a stock. Is the company profitable? Does it have positive cash flow? How much debt, if any, has it taken on to maintain or expand its operations?
We'll also examine management's faith in the company's future through the level of insider ownership. As a possible tiebreaker, we'll look at each company's gross margin, to see how much of each dollar has to go toward making the sale.
Our two competitors lock up:
|
Metric |
Westport Innovations |
Clean Energy Fuels |
|---|---|---|
| Profit Margin | (29.1%) | (25.1%) |
| Free Cash Flow Margin | (28.9%) | (57.9%) |
| Debt-to-Equity Ratio | 0.2 | 0.5 |
| Insider Ownership | 19.7% | 32.2% |
| Gross Margin | 35.1% | 33.1% |
Sources: Morningstar, Google Finance, Yahoo! Finance. Winners in bold.
It looks like Westport takes this round thanks to lower debt and a better gross margin. How will it fare in the growth-rate battle ahead?
Growth battle
If we were comparing two steady dividend-paying stalwarts, we might look at things like dividend yields or payout ratios. But these two will face off with the growth-based metrics that the market often favors for momentum-driven investments.
How fast has the stock price grown? Has revenue grown as quickly? How about the bottom line? Have either of these companies shown a willingness to dilute your shares with secondary offerings? With the exception of share counts, the more growth we see, the better. These numbers will be calculated based on each stock's past three years of history -- or whatever history we can get, if it doesn't have that much to analyze.
Let's look at share metrics first:
WPRT Total Return Price data by YCharts
Each stock takes one point here. Let's dig deeper:
|
Total Growth Over 3 Years |
Westport Innovations |
Clean Energy Fuels |
|---|---|---|
| Stock Price | 364.3% | 31.0% |
| Revenue | 110.3% | 128.8% |
| Net Income | (210.5%) | (127.3%) |
| Free Cash Flow | (391.7%) | (929.4%) |
| Shares Outstanding | 71.3% | 44.6% |
Sources: Morningstar and YCharts. Winners in bold. Growth calculated from 2009 annual result to trailing-12-month result.
It wasn't pretty, but Clean Energy Fuels takes the growth crown.
Sentiment battle
How do the world's most engaged market participants view these companies? Let's see what Wall Street's analysts expect from these companies, and what our Motley Fool CAPS community thinks.
|
Metric |
Westport Innovations |
Clean Energy Fuels |
|---|---|---|
| "Buy" Recs (% of Total Ratings) | 64.7% | 30% |
| Forward Growth Rate (2013) | 45.9% | 50% |
| CAPS Sentiment (% Outperform) | 97.6% | 96.6% |
Sources: Yahoo! Finance and Motley Fool CAPS. Winners in bold.
After three rounds, Westport's in the lead thanks to our CAPS players. But the next round is for all the marbles. Can Westport claim to have the best opportunities in the future, or will Clean Energy pull ahead with a superior business model and a smarter strategy?
Battle for the future
This is a very tough call, and you may very well disagree with me. Westport is a pure technology bet, while Clean Energy's promise has thus far been in infrastructure. Technology has so far attracted the market's interest to a much greater degree, as you can see from Westport's multibagger status.
We've been waiting years for Westport to turn a profit, but the same can be said of Clean Energy. Both have been bleeding cash to an even greater degree as their revenues grow, which raises the question: At what point does the nat-gas revolution become profitable? Both companies recently reported earnings, and both (Clean Energy's results here and Westport's results here) show a positive trend on the bottom line. It comes down to who needs whom more.
Without a natural gas highway, there won't ever be much demand for nat-gas engines. Patents are valuable, but they do expire, and Westport's been boasting of its strong patent portfolio since 1999, at the latest. On the other hand, infrastructure's only competitive advantage is location, and there's no guarantee a critical mass of nat-gas vehicles will ever develop to ensure a fueling station's profitability.
Westport will earn a very narrow edge in the end, based on its two-to-one victory in the hard numbers and because there's no reason it shouldn't become consistently profitable with fewer nat-gas vehicles on the roads than Clean Energy. Still, I'd keep my eye on the Cummins-Westport partnership, at least until other engine makers start producing Westport's engines in greater numbers.
Want to stay informed on the future of nat-gas transportation? The Fool's got a low-cost way: our premium research service covering Clean Energy Fuels. For less than the cost of your average trade, you'll get a full year's worth of updates on CLNE's major behind-the-scenes moves. Click here -- Clean Energy Fuels -- to get started.
