Shares of energy infrastructure company New Fortes Energy (NFE) have risen in the wake of the Russia-Ukraine war and rising electricity prices. The stock has risen more than 70% so far this year. But will the price power at least be around in time? Let’s talk.
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Integrated gas-to-power infrastructure company New Fortes Energy Inc. (NFE) Provides energy and development services for end users worldwide in New York City. The company is new to the LNG-export business but wants to start supplying 11 million metric tons of super-child fuel annually in a few years. Which is about 16% of total US exports.
The agency recently applied to federal regulators to create an offshore liquefied natural gas (LNG) export project off the coast of Louisiana that could enter service. With the first quarter of 2023. The NFE seeks to accelerate LNG production and profitability amid the supply-demand imbalance caused by the Russia-Ukraine war, and supports President Biden’s recently announced goal of sending more LNG to Europe. Demand is growing, especially in Europe, which is heavily dependent on Russian gas. In addition, Russia threatens to reduce energy supplies Pushing the price of super-cold fuel. NFE, on the other hand, has an LNG project in Pennsylvania Hold on Due to some opposition from environmental groups. The company will have to get a new air permit from the state to start construction of the proposed plant.
NFE shares rose 73.8% year-on-year as investors rushed to buy energy stocks during the Russia-Ukraine war. However, the stock is down 9.3% compared to last year, closing at স 41.96 in yesterday’s session.
Here’s how to shape NFE’s performance in the near term:
Premium valuation
Forward position EV / Sales, NFE is currently trading at 5.92x, which is 168.9% higher than the 2.20x industry average. Also, its 3.96 forward price / sales ratio is 153.3% higher than the 1.56 industry average. The forward price / cash flow of 76x NFE is 5.23x 182.1% higher than the industry average.
Significant debt burden
The company has total debt of $ 4.16 billion, compared to its net debt of $ 3.97 billion. Moreover, its inadequate cash flow raises concerns about its ability to repay debt. Its trailing 12-month net operating cash flow came in at $ 84.77 million, but its rear-12-month leveraged free cash flow stood at a negative $ 430.72 million, resulting in a negative 11.34 debt / free cash flow ratio. Also, the NFE’s rapid ratio stands at 0.78, raising questions about its ability to pay liabilities.
Mixed profitability
NFE’s 47.27% and 7.34% gross profit and net income margins are 40.40% and 7.32%, respectively, 17% and 0.3% higher than the industry average.
However, its negative 32.56% leveraged FCF margin compares with the 8.32% industry average. 1.41% and 4.49% lower than the ROA and ROTC industry averages of 52% and 3.4%, respectively.
Adverse POWR rating
NFE has an overall D rating, which translates to আমাদের in our proprietary sales POWR rating Method. POWR ratings are calculated taking into account 118 individual factors, each factor weighing to an optimal degree.
The stock has a D grade for stability, consistent with its 1.56 beta.
There is an F grade for NFE quality. Let’s justify this grade of extended assessment.
There are 44 stocks in it Energy – service Industry, ranked NFE # 41
In addition to what I mentioned above, one can also see NFE grades for sentiment, growth, momentum and quality. Here.
Energy – See the top-rated stocks in the service industry Here.
The last row
To capitalize on the growing demand, NFE wants to accelerate its LNG projects However, its projects have not yet been launched and are expected to take some time before reaching full capacity. Moreover, its significant debt burden is worrisome. Also, considering its high valuation and high beta, which indicates volatility, the stock looks less attractive than its peers. So, I think it might be better to avoid stocks now.
How New Fortress Energy Inc. (NFE) stacks up against his peers?
Although NFE has an overall POWR rating of D, one might consider investing in the following Energy – Services stocks with a B (Buy) rating: North American Construction Group Ltd (NOA), Archrock, Inc. (AROC), And NOW Inc. (DNOW)
NFE shares remained unchanged in premarket trading on Wednesday. Year-to-date, the NFE rose 74.40%, compared to the -7.43% increase in the benchmark S&P 500 index over the same period.
About the Author: Shubhshree Kar
Shubhshree’s keen interest in financial instruments led him to build a career as an investment analyst. After earning a master’s degree in economics, he acquired knowledge of equity research and portfolio management in Finlatics.
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