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Is it Worth Betting on Hot Meme Stock Clean Energy (CLNE)?

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Clean Energy Fuels (CLNE - Free Report) has been receiving significant attention from retail traders lately, with a lot of discussion on subreddit r/wallstreetbets. The stock has surged more than 40% over the past month, with trading volumes touching a record high of 157.1 million on Jun 9, 2021.

In addition to compressed natural gas (“CNG”) and liquefied natural gas (“LNG”), Clean Energy supplies renewable natural gas (“RNG”) for vehicles. Use of RNG in vehicles helps in reducing emissions significantly. The stock has primarily been targeted by the Reddit forum as the company recently announced plans to expand renewable fuel solution for customers, and disclosed plans to carry out greater investment for the development of RNG from dairies as well as other agricultural facilities. It intends to go ahead with the RNG development plan independently as well as jointly with partners like TotalEnergies SE , and BP Plc (BP - Free Report) .  

The stock has been gaining momentum over the past month, with many energy behemoths showing faith in the concept of Clean Energy Fuel. As RNG has huge potential as a clean energy source, companies like Chevron Corporation (CVX - Free Report) , TotalEnergies SE and BP Plc, among others, have already signed deals with Clean Energy to promote as well as expand the infrastructure for wider usage of the same. However, these developments have already been factored into the stock’s price. Also, actions of retail traders have made the stock overvalued at the current price level. This is particularly obvious when one looks at the company’s trailing 12-month financial performance.

Our proprietary Style Scores system has assigned a Value score of D to Clean Energy, which is a conclusive indication that the stock is overvalued. On a Price/Sales basis, the stock is currently trading at 7.82X compared with the industry average of 2.47X. Also, in terms of Price/Cash flow, Clean Energy’s 32.35X compares unfavorably with the industry average of 13.58X. The premium valuation looks unjustified when the company itself expects to report negative earnings in 2021.

Clean Energy’s 2021 earnings outlook remains weak. The Zacks Consensus Estimate for the bottom line for full-year 2021 has been revised 460% downward over the past 90 days to a loss of 18 cents per share. As a result, Clean Energy currently carries a Zacks Rank #4 (Sell). So, despite the hype surrounding the stock, it is better to avoid it at this moment.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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