Clean Energy Fuels Corp. (CLNE - Get Rating) and EOG Resources, Inc. (EOG - Get Rating) are two established players in the natural gas sector. CLNE procures and distributes renewable natural gas (RNG) and conventional natural gas in the form of compressed natural gas (CNG) and liquefied natural gas (LNG) for the United States and Canadian transportation markets. EOG explores for, develops, produces, and markets crude oil and natural gas in major producing basins in several regions, including the United States, the United Kingdom, Canada and China.

Reduced natural gas production in the United States and record-high exports of LNG have been driving up the price of natural gas. An increasing demand for clean, low-carbon fuel is also expected to boost its price further. Also, as the major economies gradually reopen, the demand for natural gas is  expected to go up even more given its application across several industries, such as energy generation and transportation. Investors’ increasing interest in the natural gas industry is evidenced by  the United States Natural Gas Fund, LP’s (UNG) 11% gains over the past month compared to the SPDR S&P 500 Trust ETF’s (SPY) 2.1% returns. So, we think both CLNE and EOG should witness solid upside going forward.

But while CLNE has gained 412.4% over the past year, EOG has returned 61.4%. CLNE’s more than 35% gain over the past month can be attributed to the meme craze because it is currently the most discussed stock on the subreddit WallStreetBets. However, in terms of year-to-date performance, EOG is a clear winner with 70.2% returns versus CLNE’s 42.1%.  So, which of these two stocks is a better pick now? Let’s find out.

Latest Movements

Last month, CLNE announced new renewable natural gas (RNG) contracts—such as a five-year agreement with EVO Transportation & Energy Services, Inc. to co-brand stations—which should add significant growth to its  current anticipated one million gallons of natural gas distribution. This is expected to benefit the company as fleets across North America increasingly adopt the clean, low-carbon fuel to power heavy- and medium-duty trucks.

EOG has declared a regular dividend of $0.41 per share and a special dividend of $1.00 per share, both payable on July 30, 2021. The company’s Chairman and CEO, William R. Thomas said, “Earlier this year we raised the regular dividend and reduced debt outstanding. Our long-standing financial discipline now positions EOG to return additional cash to shareholders through a special dividend, bringing the total expected return of cash to shareholders in 2021 to $1.5 billion.”

Recent Financial Results

CLNE’s total revenue declined by 10.3% year-over-year to $77.14 million for the first quarter, ended March 31, 2021. The company’s non-GAAP net loss came in at $1.33 million compared to a $2.61 million loss in the year-ago period. Its non-GAAP loss per share came in at $0.01, which remained unchanged from the prior-year quarter value.

For the first quarter ended March 31, 2021, EOG’s total revenue was  $3.69 billion, which represents a 24.6% sequential growth. The company’s adjusted net income increased 197.5% year-over-year to $946 million. EOG’s adjusted EPS came in at $1.62, up 194.5% year-over-year.

Expected Financial Performance

Analysts expect CLNE’s annual revenue to increase 9.4% in its fiscal year 2021 and 12.3% in  2022. Its EPS is expected to grow 200% for the current quarter, ending September 30, 2021, and 100% in  2022. Also,  its EPS is expected to grow at a 15% rate  per annum over the next five years.

In comparison, , EOG’s annual revenue is expected to increase 40.1% in  2021 and 6.4% in 2022. The company’s EPS is expected to grow 246.5% for the quarter ending September 30, 2021, and 4.5% in its fiscal year 2022. Also, EOG’s EPS is expected to grow at a 54.5% rate per annum over the next five years.

Profitability

EOG’s $10.51 billion trailing-12-month revenue compares with CLNE’s $282.86 million. Moreover, EOG is more profitable with a  53.35% gross profit margin versus CLNE’s 35.35%.

Also, EOG’s ROE and ROA of 0.30% and 1.06%, respectively, compare favorably with CLNE’s negative values.

Valuation

In terms of forward EV/Sales, CLNE is currently trading at 7.22x, 108.7% higher than EOG’s 3.46x. In terms of forward EV/EBITDA also, CLNE’s 34.62x is 486.8% higher than EOG’s 5.90x.

So, EOG is the more affordable stock.

POWR Ratings

CLNE has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. However, EOG has an overall B rating, which represents a Buy. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

CLNE has a C grade for Momentum. This is justified given its 35.4% gains over the past month and 24.9% loss over the past three months. EOG’s A grade for Momentum is in sync with its 62.9% gains over the past six months and 13.2% returns over the past three months.

CLNE’s has a C grade for Growth, consistent with analysts’ expectations that its revenue and EPS will increase in the near-term but at a moderate rate. EOG’s B grade for Growth is in sync with analysts’ expectations that its revenue and EPS will grow at a robust  rate.

Also,  EOG has a B grade for Sentiment, consistent with favorable analyst sentiment, while CLNE has an F Sentiment grade. Of the 44 stocks in the F-rated Energy-Services industry, CLNE is ranked #34. EOG is ranked #18 of 95 stocks in the Energy-Oil & Gas industry.

In addition to the POWR Ratings grades we’ve just highlighted, we’ve rated both EOG and CLNE for Value, Quality and Stability also. Click here to see the additional ratings for EOG. Also, get all CLNE’s ratings here.

The Winner

As governments across the globe implement   policy measures to combat climate change, the demand for natural gas as the partner fuel for renewable energy-based generation should continue  rising. However, EOG seems to be a better bet in this space based on its discounted valuation and favorable analyst sentiment versus  CLNE.

Our research shows that the odds of success increase if one  bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about top-rated stocks in the Energy-Services industry. Also, click here to see other top-rated stocks in the Energy-Oil & Gas industry.

EOG shares were trading at $85.53 per share on Tuesday afternoon, up $0.67 (+0.79%). Year-to-date, EOG has gained 73.54%, versus a 13.94% rise in the benchmark S&P 500 index during the same period.

About the Author: Ananyo Guha Niyogi

Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...

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