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(click to enlarge)Just about anyone who has invested in Clean Energy Fuels Corp. (CLNE) has traveled a rough road thus far. Clean Energy has serious potential but its great story hasn't materialized at all. The stock has done absolutely nothing for shareholders and if you're the type of investor that screens for strong fundamentals it probably hasn't hit your radar; at least not yet...

What do United Parcel Service (NYSE:UPS), Frito-Lay/Pepsi (NYSE:PEP), Procter & Gamble (NYSE:PG), Ryder (NYSE:R), and Lowe's (NYSE:LOW) all have in common? Each of these companies, and more and more of corporate America, is pouring money into the natural gas industry. Companies like these all see the writing on the wall with regard to energy trends and they are expanding their natural gas fleets.

The U.S. heavy-duty trucking market is beginning to embrace the economic and environmental benefits of natural gas fueled trucks. There are over 8 million heavy-duty trucks in the U.S. consuming about 20,000 gallons of fuel per year. The operating cost savings that operators will benefit from by converting from gasoline and diesel to natural gas along with movements towards clean air regulations bode extremely well for companies like CLNE.

Company summary:

Clean Energy is headquartered in Newport Beach, CA and has a market capitalization of almost $1.1 billion. CLNE supplies compressed natural gas [CNG] fuel for light, medium, and heavy-duty vehicles; and liquefied natural gas [LNG] fuel for medium and heavy-duty vehicles. They are the largest provider of natural gas fuel for transportation in North America. CLNE fuels over 30,000 vehicles per year at over 500 fueling stations throughout the U.S. and Canada. The company has created and continues to develop a network of fueling stations with what they call "America's Natural Gas Highway." This network connects major truck corridors across the country for coast-to-coast and border-to-border natural gas fueling.

Fundamental view:

Clean Energy is still losing money and has yet to turn a profit. They have invested tremendous capital into infrastructure so depending on how you look at CLNE as an investment, they've either been bleeding cash from day one or that they've been strategically building towards profitability. We see it as more of the latter and that this company is extremely close to capitalizing on their investments before running out of money!

CLNE last released its earnings data on 11/7/13. The company reported -$0.16 EPS (earnings per share) for the quarter, beating the analysts' consensus estimate of -$0.21 by $0.05. The company had revenue of $86.30 million for the quarter, compared to the consensus estimate of $87.48 million. During the same quarter last year, the company posted -$0.19 EPS. Clean Energy's revenue was down 5.7% compared to the same quarter last year. Of the 10 analysts covering CLNE, the consensus Q4 2013 EPS estimate to be released on 2/27/14 is -$0.19.

Earnings per share are now expected to grow 52.44% over last year and revenue is expected to be $361.9 million, which would be a growth rate of 8.4% over last year. CLNE has a 5-year annualized growth rate of 23.2%.

The total number of fueling stations (both CNG and LNG) has grown from 196 in December of 2009 to 445 by September of 2013 (127% increase). CLNE is not just building these stations but they're also extremely smart in their partnerships. They have partnered with some "big boy" money via General Electric (NYSE:GE) and have also positioned themselves well as the main natural gas provider to companies like UPS. UPS is investing millions into their own stations and the more that pop up the more that companies will feel comfortable in changing their entire fleets. Watch for CLNE to strike up further agreements with trucking companies like Swift, J.B. Hunt (NASDAQ:JBHT), Schneider, Arkansas Best (ABFS) etc. It's important to remember that the change from gas to diesel in trucking took years and this game changing technology has even greater catalysts pushing natural gas usage to a "tipping point."

Technical view:

If we're looking at the tea leaves from a charting perspective, CLNE needs to hold the $11 to $12 level; anything below that could present serious downside. Over the next year if the company can break through $14, which we think it will, you could see a sizeable breakout. CLNE currently trades right around $12/share and as of this writing has a 52-week low of $10.63 and a 52-week high of $14.83. Aside from a few brief runs north of $20 it's basically been dead money and trades right where it was in May of 2007.

The 200-day moving average has dropped a bit to $12.68 but we see some bullish movement in the 50-day moving average now trending upwards to $12.39. Short-interest on the stock has dropped by -9.11% with about 4.2 million shares sold short and currently has a 7.7 days to cover (short interest ratio).

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Sentiment view:

Institutional stock ownership is actually low at about 36% but we actually see that as bullish in this case. Most analysts have mediocre ratings on CLNE, which doesn't bother us in the slightest. Without delving into how accurate most analysts' ratings are, we're fine with this company slowly gaining coverage and once the upgrades and positive press comes it may be too late to buy the stock. As a matter of fact once they rush in late to the party we'll evaluate and further crystallize our exit strategy.

One inside owner you may want to know about is the co-founder, T. Boone Pickens. He currently controls about 25% of the company and along with some other company insiders has been accumulating shares. We won't get into too much detail here but although he has lost money on investments before (who hasn't?) this is one guy you don't want to bet against. Not only does he "tell it like it is" he's a former oil executive who has been way ahead of the herd; this story is no different.

Buy, Sell, or Hold?

It's still early but we're buyers of CLNE. Although there is no rush we also believe that it makes sense to open a position in the stock before the upcoming February earnings announcement. As with any "recommendation" you must of course remember that this is not intended specifically for you since we have no idea what your situation or risk profile looks like. With that bit of light disclosure put out there, investors looking long term could be presented with a very decent entry point here at $12.

We believe that by 2015, Clean Energy is quite possibly headed for its first year of profitability. Leading up to this becoming a reality allows investors to still buy it at fairly cheap levels. Even before the hype and potential matches up with its reality, CLNE could easily see a 20% higher stock price by year-end without much help from the broader stock market.

Source: Clean Energy Fuels: Bleeding Soon To Become Profit