Interesting article on CLNE
The trajectory of its cash flows has this stock potentially dirt cheap
Jason Hall (Clean Energy Fuels): If you've watched the price of Clean Energy's stock over the past few years, I wouldn't fault you for think this was a failing company knocking on the doors of death:
CLNE Chart
CLNE DATA BY YCHARTS
At least you might think that if you didn't go any further than just looking at the stock price. But when you pop the hood on the business itself, things look very different. Cash flows and funds from operations have improved greatly in the past three years:
CLNE Funds from Operations (TTM) Chart
CLNE FUNDS FROM OPERATIONS (TTM) DATA BY YCHARTS
This is a product of three things:
Cutting operating expenses, debt, and capital spending to drive down cash outflows.
Still spending enough capital to grow the station count.
Growing fuel volumes sold to drive higher gross profit dollars.
And this has the company positioned for what could be its best year ever from a cash-flow perspective, as its SG&A and interest expenses will be millions less this year, and fuel volumes are on track to grow in the high single digits again, driving even more profit margin dollars and potentially being free cash flow positive for the full year while also paying off even more debt.
From a value perspective, Clean Energy trades for less than 4 times trailing EBITDA, and less than 18 times cash from operations. For a company set to grow cash flows and core fuel volumes by nearly double-digit rates, that's pretty cheap.
The risk? A major asset sale earlier this year will further reduce debt and operating expenses, but it will also affect margins. If the effect is bigger than expected, cash flows could suffer. On balance, I think the reward is worth the risk.
