CLNE Action: Don’t Buy Clean Fuels History Until Finances Improve

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Clean energy fuels (NASDAQ:CLNE) provides natural gas as an alternative fuel for vehicle fleets (and related refueling solutions for these fleets) in the United States and Canada. CLNE stock has developed renewable natural gas (RNG) to make the transition to low-carbon transport.

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The vision of Clean Energy Fuels Corp is to fight climate change, aiming for its LNG fuel to be fully zero carbon by 2025. And while compressed natural gas (CNG) and liquefied natural gas (LNG) for light, medium and heavy loads are also supplied by the company, the main focus as a key advantage for its business is renewable natural gas (RNG).

But why?

Why renewable natural gas (RNG) is too important

On its official website, Clean Energy Fuels has a section dedicated to RNG. He mentions that “Renewable Natural Gas (RNG) is a transportation fuel made from organic waste. It dramatically reduces carbon emissions, and unlike conventional natural gas, RNG is not a fossil fuel and does not involve drilling.

And there are several testimonies like “It’s here now, it works, and it’s already zero back, in some cases less than zero.” And the technology is relatively inexpensive compared to some of the alternatives, ”excerpt from Heavy trucking October 2020 issue.

I am not claiming that RNG is not an important alternative fuel that can make a big difference in climate change. But does the CLNE share reflect this potential and should it be considered an attractive investment?

The CLNE share should increase but remains too volatile

The infrastructure bill backed by President Joe Biden’s administration is expected to go ahead by the end of September 2021. The bill offers a vision for U.S. infrastructure, including clean energy and electrification of mobility, which should in theory support the stock of CLNE.

But it is a very volatile energy value with a beta (5 years monthly) of 1.94 according to Yahoo! Finance. And an additional factor that has made CLNE stocks too volatile is the frenzy of “memes stocks”.

How else to explain a 52-week range of $ 2.36 to $ 19.79 and a recent stock price of $ 8.02? Retail investment stock market boom, FOMO, FUD and a new retail trend that moves stocks too fast, too high, then throws them, too fast too low.

But while I ignore this meme status for the CLNE stock, I place all my attention on its financials. But first some news from the company.

Economic news

Clean Energy Fuels “announced a a slew of new offers in response to the demand for renewable natural gas (RNG), a fuel produced from organic waste, as more fleets adopt and expand their use of low carbon transportation fuel. RNG represents more than 74% of the 26 million gallons of fuel that Clean Energy expects to supply under these recent signed agreements.

Other deals have been reported, with “new renewable natural gas (RNG) contracts as fleets in North America are growing. continue to adopt clean, low carbon fuel to propel heavy and medium trucks.

And there is a strategic partnership with Chevron Corporation (NYSE:CVX) To reduce emissions in large fleets.

What I also find very interesting is the news that Clean Energy Fuels was “investing in develop renewable natural gas dairies and other agricultural facilities.

This is all positive. What is not the financial data and valuation is so positive.

Finance: weak income growth is a big problem

Clean Energy Fuels Corp has a strong balance sheet with a debt ratio of 0.1 and a debt ratio of 3.32 according to GuruFocus. Its profitability, however, is a whole new story – a very negative story.

With very weak sales growth of 1.41%, 1.22% and -17.41% respectively for 2018, 2019 and 2020, things are not rosy from the start of the financial analysis of the CLNE stock. With net losses in four of the five fiscal years for 2016-2020, I’m not impressed either. A net profit of $ 20.42 million in 2019 turned into a loss of $ 9.86 million for 2020 according to MarketWatch.

I am also skeptical of the volatile Free Cash Flow trend as it constantly shifts from losses to gains. Ideally, I would like to see a positive lasting trend. Nonetheless, Clean Energy Fuels Corp made a share buyback in 2020, which is odd for a company with declining revenue growth and mostly net losses. I would still like to see more.

The second quarter 2021 operating results confirmed my biggest concern – a substantial drop in income.

“The Company’s revenue for the second quarter of 2021 was $ 0.5 million, down 99.2% from $ 59.9 million for the second quarter of 2020.” In the same time, “the company shipped 101.4 million gallons in the second quarter of 2021, an increase of 13% from 89.5 million in the second quarter of 2020.”

I am not too optimistic.

And even the assessment seems to be very stretched.

CLNE share valuation: not yet cheap

I like when a company puts key ratios on its website as a starting point for financial analysis. Kudos to Clean Energy Fuels. What worries me too much?

I find the price versus cash flow (FY) of 50.21 and the price versus revenue (FY) of 6.22 to be very high, which supports my thesis that the CLNE stock n is not cheap.

Overall, I see a lot of potential for Clean Energy Fuels Corp, but its stock is not very appealing now given its weak revenue trend and volatile free cash flow.

As of the publication date, Stavros Georgiadis, CFA does not have (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, submitted to InvestorPlace.com Publication guidelines.

Stavros Georgiadis is a CFA Chartered Equity Research Analyst and Economist. He focuses on US stocks and has his own stock blog at thestockmarketontheinternet.com/. He has written various articles for other publications in the past and can be contacted at Twitter and on LinkedIn.


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