Clean Energy Fuels Corp (NASDAQ:CLNE) delivering an 8% year-over-year growth in sales, and booking a profit of $0.03 a share, explains why it deserves a higher valuation in the market. After succumbing to short selling pressure, the stock is once again skyrocketing as investors react to the better than expected Q4 financial results.
CLNE Share Price Analysis
Strong guidance for 2019 is another indication that the company is finally returning to growth after a lackluster 2018. Investor confidence has since ticked higher if a spike in trading volume after a period of subdued activities is anything to go by.
Clean Energy Fuels is turning out to be a pullback play as investors react to improving underlying fundamentals as well as market sentiments. The stock is already up by more than 50% for the year, as it continues to climb the ladder.
A rally followed by a close above the $3 a share level should reaffirm the emerging uptrend opening the door for the stock to make a run for 52-week highs. Immediate support after the recent spike is seen at the $2.30 a share level. A breach of the critical support level would leave the stock susceptible to further drops probably back to its 52-week lows.
About Clean Energy Fuels
Clean Energy Fuels casts itself as a leading provider of natural gas fuel in North America. The company builds and operates CNG and LNG vehicle fueling stations. It also supplies renewable natural gas as well as compressed natural gas and liquefied natural gas for use in powering vehicles.
Why is Clean Energy Fuels Surging?
A better than expected Q4 financial report supported by a bullish 2019 outlook is one of the reasons why shares of Clean Energy Fuels are skyrocketing in the market. The company is slowly turning out to be darling of Wall Street after generating a substantial amount of cash in 2018 compared to a high cash burn rate in 2017.
A sharp turnaround into positive cash flow comes on the heels of the clean energy company stemming its expenditure. Operational costs on selling, general and administrative expenses were down in the year. In addition, the company paid down $185.5 million worth of debt, relieving itself the burden of interest costs. The company is now left with $50 million in convertible debt due next year.
The company’s total expenditure shrunk to $77.2 million or 22.3% of sales in 2018, compared to $95.7 million or 28% of revenue as of 2017. Clean Energy Fuels also cut its interest expense by $1.8 million. Fourth quarter revenue was up 8% to $96.2 million as full-year revenue increased 1.4% to $346.4 million, compared to $341.6 million for 2017.
Clean Energy Fuels generated a net income of $6.9 million in Q4, compared to a net loss of -$28.3 million for the same period last year
“We’re exiting 2018 with good volume growth and excellent momentum from a successful year. Our operating results for 2018 were the best in the past five years, and we finished 2018 with more cash and investments than debt,” said Andrew J. Little fair, Clean Energy’s President and Chief Executive Officer.
The management is projecting yet another breathtaking year on revenue and earnings growth. The Chief Finance Officer Bob Vreeland says they expect volumes to grow in the low double digits range. Margins, on the other hand, should be between $0.24 and $0.28 a gallon.
Clean Energy Fuels should be able to generate an adjusted EBITDA of between $50 million and $55 million in 2019. However, the company could plunge to a loss of between -$12 million and -$18 million should the Alternative Fuels Tax Credit fail to come into effect having expired in 2018.
Clean Energy Fuels has started reaping the rewards of its aggressive debt and cost-cutting drive. The company transitioning into a positive cash flow entity is a milestone that cannot be taken for granted. With management confident of accelerated growth as was the case in 2018, the future looks bright.
The company is on course for a stellar financial year supported by a strong balance sheet and expectations of double-digit volume growth. Clean Energy Fuels is an exciting pick given that it has tremendous prospects of success. We expect the stock to keep rallying.
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Disclosure: We have no position in CLNE and have not been compensated for this article.