Does New Fortress Energy deserve a place in your portfolio?
Integrated Power Generation Infrastructure Company New Fortress Energy Inc. (ENF), headquartered in New York, provides affordable energy and development services to end users around the world. NFE’s share price has climbed 23.6% in the past five days after the company raised its economic outlook for the fourth quarter of 2021 and fiscal 2022 from those previously discussed in a recent filing. published by the SEC.
However, the company’s shares are down 39.5% in progress since the start of the year and 30.4% in the last year. Additionally, the stock is trading 50.8% below its 52-week high of $ 65.90, indicating a near-term decline.
While the company’s debt financing efforts may help it fund several projects around the world, given its already high long-term debt, debt financing could make investors nervous. In addition, the abnormal volatility of the liquid natural gas markets and persistent supply constraints could hinder its growth.
Here is what could influence the performance of NFE in the short term:
Unprecedented volatility in the LNG market
Amid electricity shortages in China, the world’s largest buyer of LNG, and low stocks in Europe fueling significant competition for LNG, Liquefied natural gas (LNG) prices in Asia soared this week. As global demand for gas continues to rise and countries recover from a decline in 2020, supply issues from lower production have caused supply to tighten. In addition, prices are expected to reach new highs in winter when demand for heating peaks. With soaring coal prices as the industry faces supply constraints, demand for natural gas is expected to continue to grow. The growing gap between supply and demand could exacerbate problems in the LNG market. This could have a negative impact on NFE’s projects and hinder the growth of the company.
In September, NFE carried out a term loan installation secured by its shipping facility. She took out an initial loan of $ 430 million. In addition, the company could borrow up to $ 725 million under the shipping facility. The loans will bear an annual interest rate equal to LIBOR plus 3% and will have a term of three years. NFE plans to use the net proceeds from the marine facility to finance the development and construction of the company’s energy infrastructure projects. However, this could pose a risk to his business given its high long-term debt and irregular cash flow.
NFE’s operating expenses increased 4.9% sequentially to $ 101.43 million for the second quarter ended June 30, 2021. In addition, its loss from operating activities amounted to $ 12.24 million, while his net loss amounted to $ 1.73 million. In addition, NAK’s loss per share was $ 0.03 for the quarter. And its net decrease in cash and cash equivalents totaled $ 399.02 million for the six-month period ended June 30, 2021. The company’s long-term debt stood at $ 3.33 billion as of June 30. 2021.
Its 12-month ROE, ROA and leveraged free cash margin are negative 8.4%, 1.3% and 38.6%, respectively. In addition, its operating cash flow over the past 12 months was negative $ 156.60 million. The share’s 14.2% EBITDA margin is 41.2% lower than the industry average of 24.1%.
In terms of 12-month rolling EV / EBIT, NFE is currently trading at 299.04x, which is 1310.9% above the industry average of 21.19x. In addition, its 8.98x rolling 12-month price / sales is 450% above the industry average 1.63x. In addition, the stock’s forward price-to-cash flow ratio of 62.61x is 954.8% higher than the industry average of 5.94.
Unfavorable POWR ratings
NFE has an overall D rating, which translates to Sell in our POWR odds system. POWR scores are calculated by considering 118 different factors, each factor being weighted to an optimal degree.
Our proprietary scoring system also rates each stock against eight different categories. NFE has an F grade for quality. The negative profit margin of the share is reflected in this note.
Also, it has an F rating for value, which is consistent with the stretched valuation of the stock.
In terms of a stability rating, NFE has a C. This justifies the title’s relatively high beta value of 1.61.
Beyond the ratings I have highlighted, one can check out additional NFE ratings for sentiment, growth and momentum. here.
Of the 42 D-listed stocks Energy – Services industry, ENF is ranked No. 38.
While NFE’s commercial advance into new markets and the increase in new customer direct sales agreements have helped it advance in the LNG market, soaring demand for pre-winter fuel in a the context of a supply shortage could threaten its growth. Meanwhile, its weak balance sheet and stretched valuation could pose a risk to the stock. So we think the stock is best avoided now.
How does New Fortress Energy Inc. (NFE) compare to its peers?
While NFE has an overall POWR rating of D, one might consider taking a look at its industry peers, Oceaneering International, Inc. (NS) and Archrock, Inc. (ARDOC), with a B (Purchase) rating.
NFE stock was trading at $ 34.47 per share on Monday afternoon, up $ 2.07 (+ 6.39%). Year-to-date, the NFE has fallen -35.18%, compared to an 18.43% increase in the benchmark S&P 500 over the same period.
Imon is an investment analyst and journalist with a passion for financial research and writing. She started her career at Kantar IMRB, a leading market research and consumer advisory organization. Following…