I am neutral on Clean Energy Fuels (CLNE) as it looks slightly overpriced relative to its historical averages and Wall Street analysts are neutral on it, even though its average price target implies substantial upside potential.
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Clean Energy Fuels is a natural gas distribution company that is known as one of the largest providers of RNG for the transportation industry in the U.S.
The company designs, builds, operates, and finances vehicle fleets’ natural gas filling stations across the country. The company has also been serving its customers and offering unique solutions to obtain federal, state, and local clean air incentives and rebates required to finance and acquire natural gas vehicles.
Strengths
Clean Energy Fuels has created a niche in the market with its zero- and low-carbon fueling solutions backed by its renewable natural gas offering.
Its renewable natural gas is acquired from landfills and livestock manure, making the process relatively time-efficient and cost-effective. Additionally, its dedication toward saving and preserving the environment has also given a significant advantage in the industry if compared to the shifting demands.
Since its inception, the company has become a pioneer in the RNG industry that prefers this substitute over other vehicle fuel options. The company’s success and growth have garnered high hopes for future expansions and profitability.
Recent Results
In Q3 of 2021, ended in September, Clean Energy Fuels incurred a loss totaling $8 million. However, this loss is linked with the company’s investment in research and development as well as its mixed earth elements production in Utah, where it increased its levels by a significant margin.
According to the quarterly financial analysis, the company’s net revenue totaled $86,095,000, whereas the operating loss totaled $3,101,000. This led to a net loss of $4,158,000 for the quarter and the net loss per basic and diluted share reaching $0.02.
In 2020’s third quarter, the net loss per basic and diluted share was $0.01.
Valuation Metrics
CLNE stock looks overvalued here as it trades above its historical valuation multiple average on an EV/EBITDA ratio basis.
Its EV/EBITDA ratio is 20.3 compared to its historical average of 18.4.
Moving forward, analysts expect EBITDA to increase by 1.3% in 2022 and by 74.4% in 2023.
Wall Street’s Take
According to Wall Street analysts, CLNE earns a Moderate Buy analyst consensus based on four Buy ratings, two Hold ratings, and zero Sell ratings in the past three months. Additionally, the average CLNE price target of $12.90 puts the upside potential at 95.2%.
Summary and Conclusions
CLNE stock has massive upside potential based on its average price target, Wall Street analysts are overall neutral on it and it looks slightly overvalued on a historical multiple basis.
That said, its growth potential is substantial, and it operates in the natural gas industry, which has strong tailwinds at the moment. If inflationary trends persist and the economy continues to re-open as COVID-19 cases decline, the company could deliver on its price target estimate.
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