Clean Energy Fuels Corp. (NASDAQ: CLNE) investors have enjoyed seeing the stock price increase by 82.9% over the prior three months. As a small-cap stock, hardly covered by analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. However, could the stock still be trading at a relatively cheap price? Let’s take a look at the company’s expected growth and valuation based on its most recent financial data to see if there is further upside moving forward.
What’s The Opportunity In Clean Energy?
Welcoming news for investors, Clean Energy is still trading at a fairly cheap price. According to our 4 valuation analyses, the intrinsic value for the stock is $6.21 per share and is currently trading at $2.86 in the market. This means that there is still an opportunity to buy now.
| Analysis | Model Fair Value | Upside (Downside) |
|---|---|---|
| 10-yr DCF EBITDA Exit | $6.01 | 110.1% |
| 5-yr DCF EBITDA Exit | $6.26 | 118.7% |
| 10-yr DCF Growth Exit | $6.13 | 114.0% |
| 5-yr DCF Growth Exit | $6.42 | 124.3% |
| Average | $6.21 | 116.8% |
Click on any of the analyses above to view the latest model with real-time data.
What’s more interesting is that Clean Energy’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can We Expect Growth From Clean Energy?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matters the most, a more compelling investment thesis would be high growth potential at a cheap price.
source: finbox.io data explorer
With Clean Energy’s relatively muted top-line growth of 5.5% expected over the next five years on average, growth doesn’t seem like a key catalyst for a buying decision, at least in the short to medium-term.
What This Means For Investors
Growth investors typically look to invest in companies that are expanding sales, gaining market share and building customer bases. On the other hand, value investors often argue that the most successful investments are in companies that deliver the highest cash flows while trading at the lowest valuation.
But why not put those hands together? A company that has both growth and value characteristics would certainly make the most attractive investment. So what did we find out about Clean Energy?
Although Clean Energy’s future growth is relatively low, the company’s stock still appears to be trading at a discount to its intrinsic value. Therefore, it may be a great time to purchase shares or add more to your existing holdings.
It is important to note that there are a variety of other fundamental factors that I have not taken into consideration in this article. If you have not done so already, I highly recommend that you complete your research on Clean Energy by taking a look at the following:
Valuation Metrics: what is Clean Energy’s free cash flow yield and how does it compare to its publicly traded peers? This metric measures the amount of free cash flow for each dollar of equity (market capitalization). Analyze the free cash flow yield here.
Risk Metrics: what is Clean Energy’s cash ratio which is used to assess a company’s short-term liquidity. View the company’s cash ratio here.
Efficiency Metrics: return on equity is used to measure the return that a firm generates on the book value of common equity. View Clean Energy’s return on equity here.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.
