Clean Energy Fuels Corp.

Clean Energy Fuels Corp. (NASDAQ: CLNE) is a renewable energy company specializing in the procurement and distribution of renewable natural gas (RNG) and conventional natural gas (CNG), and liquefied natural gas (LNG) for the transportation markets in the United States and Canada.

Why Should Investors Make an Exit?

• Weak Margin Profile: In FY21, CLNE’s reported Gross margin of 15.7% in the period under consideration which was lower than the 36.4% reported in the same period of the corresponding previous financial year. Its reported net margin was -36.8% vs. the industry median of 10.7%.
• High Cash Conversion Days: Compared to the industry, the company has a long Cash Conversion Cycle (Days), meaning that it takes more days to convert its sales to cash. As of FY21, its Cash Cycle was 158 days, compared to an industry median of 4 days.
• Technical weakness: CLNE price is trading below the horizontal trend line on the weekly chart and is meeting resistance from the same as well as the 50-period SMA. However, the price is trading above the 21-period SMA of the trend-following indicator, which could act as immediate support. Furthermore, the RSI (14-period) momentum oscillator is trading at 58.80, reverting from higher levels. The stock's main support level is set at USD 6.70, while the critical resistance level is set at USD 8.55.
• Competition Risk: CLNE operates in a highly competitive vehicle fuel industry, and its product competes directly with gasoline and diesel in all its key markets. It also faces competition from suppliers of other alternative vehicle fuels and producers and fuelers of alternative vehicles, including hybrid, electric and hydrogen-powered vehicles. Should this competition intensify further, it could be detrimental to CLNE’s operating performance.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

CLNE's share price has declined 20.50% in the past nine months and is currently leaning towards the lower band of the 52-week range of USD 4.70 to USD 14.77. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 6.98.

Considering the company's weak liquidity profile, longer cash cycle, current valuation and associated risks. We recommend a "Sell" rating on the stock at the closing price of USD 7.95, up 0.13% as of April 01, 2022.  

Three-Year Technical Price Chart (April 01, 2022). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Disclaimer

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