Market Might Still Lack Some Conviction On Clean Energy Fuels Corp. (NASDAQ:CLNE) Even After 26% Share Price Boost

Those holding Clean Energy Fuels Corp. (NASDAQ:CLNE) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 32% over that time.

In spite of the firm bounce in price, Clean Energy Fuels' price-to-sales (or "P/S") ratio of 1x might still make it look like a buy right now compared to the Oil and Gas industry in the United States, where around half of the companies have P/S ratios above 1.6x and even P/S above 4x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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Check out our latest analysis for Clean Energy Fuels

What Does Clean Energy Fuels' P/S Mean For Shareholders?

There hasn't been much to differentiate Clean Energy Fuels' and the industry's revenue growth lately. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Clean Energy Fuels will help you uncover what's on the horizon.

How Is Clean Energy Fuels' Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Clean Energy Fuels' to be considered reasonable.

Retrospectively, the last year delivered a decent 4.8% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 59% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 13% per annum as estimated by the seven analysts watching the company. With the industry only predicted to deliver 5.7% per annum, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that Clean Energy Fuels' P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From Clean Energy Fuels' P/S?

Clean Energy Fuels' stock price has surged recently, but its but its P/S still remains modest. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

To us, it seems Clean Energy Fuels currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Having said that, be aware Clean Energy Fuels is showing 2 warning signs in our investment analysis, you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.