Shares of Fluence Energy (FLNC) jumped 1.4 % during today's morning session, bringing their 52 week performance to 177.5%. The stock seems to be overvalued in terms of traditional metrics, but in this day in age, we believe that a complete stock analysis should also take into account the company's mixed growth prospects and mixed market sentiment.
Fluence Energy, Inc., through its subsidiaries, offers energy storage products and services, and artificial intelligence enabled digital applications for renewables and storage applications in the Americas, Asia Pacific, Europe, Middle-East, and Africa. The mid-cap Utilities company is based in Arlington, United States and has 967 full time employees.
FLNC Has a Higher P/E Ratio Than the Sector Average
Compared to the Utilities sector's average of 22.89, Fluence Energy has a trailing twelve month price to earnings (P/E) ratio of -26.9 and an expected P/E ratio of 147.1. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $-0.93 or forward earnings per share of $0.17.
Earnings represent the net profits left over after subtracting costs of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since Fluence Energy's P/E ratio is higher than its sector average of 22.89, we can deduce that the market is overvaluing the company's earnings.
Fluence Energy Is Fairly Valued in Terms of Expected Growth
Another factor pointing to Fluence Energy's value is its PEG ratio of 0.17. This is the stock's price to earnings ratio divided by its estimated earnings growth rate. If the resulting ratio is near or lower than 1 -- but higher than 0 -- its indicates that the company is faitly valued in terms of expected growth.
FLNC Has an Alarming P/B Ratio
The price to book (P/B) ratio of a company is a comparison of the company's market capitalization versus its net asset, or book value. A ratio lower than 1 tells you that the equity market is undervaluing the book value of the company's assets, and ratios higher than 1 tell you that the equity markets are overvaluing the company in terms of its assets.
Of course, a company is worth much more than its assets alone, so the focus on P/B ratio is mainly to enable investors to single out undervalued securities that offer a margin of safety. Since Fluence Energy's P/B ratio of 7.22 is higher than its sector average of 1.03, such a margin of safety does not exist for the stock.
FLNC's Weak Cash Flow Generation Is Troubling
The table below shows that Fluence Energy is not generating enough cash. A well run company will generally have cash flows that reflect the strength of its underlying business, and in Fluence Energy's case, free cash flow is growing at an average rate of -16.8% with a coefficient of variability of 120.1%. We can also see that cash flows from operations are evolving at a -16.9% rate, versus 30.5%:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cashflow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-09-30 | -282,385 | -7,934 | -290,319 | -7.7 |
| 2021-09-30 | -265,269 | -4,292 | -269,561 | -1606.51 |
| 2020-09-30 | -14,016 | -1,780 | -15,796 | -163.32 |
| 2019-09-30 | 27,682 | -2,736 | 24,946 | n/a |
Fluence Energy Is Not a Profitable Business
If you are looking to make FLNC a long term investment, its weak margins may give you cause for concern. As you can see from the below, the company is generally losing money on each sale it makes. That being said, stock prices in the short term can be independent of a company's margins, and Fluence Energy's management may be able to make the business profitable in the future.
Fluence Energy's Gross Margins
| Date Reported | Revenue ($ k) | Cost of Revenue ($ k) | Gross Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-09-30 | 1,198,603 | 1,260,957 | -5.2 | 48.82 |
| 2021-09-30 | 680,766 | 749,910 | -10.16 | -820.57 |
| 2020-09-30 | 561,323 | 553,400 | 1.41 | 116.41 |
| 2019-09-30 | 92,151 | 100,068 | -8.59 | n/a |
Fluence Energy's Operating Margins
| Date Reported | Total Revenue ($ k) | Operating Expenses ($ k) | Operating Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-09-30 | 1,198,603 | 221,167 | -23.65 | -1.59 |
| 2021-09-30 | 680,766 | 89,325 | -23.28 | -220.22 |
| 2020-09-30 | 561,323 | 48,732 | -7.27 | 86.49 |
| 2019-09-30 | 92,151 | 41,675 | -53.82 | n/a |
Fluence Energy's cost of revenue is growing at a rate of 88.4% in contrast to 51.8% for operating expenses. Sales revenues, on the other hand, have experienced a 89.9% growth rate. As a result, the average gross margins growth is 11.8 and the average operating margins growth rate is 18.6, with coefficients of variability of 91.1% and 72.0% respectively.
We See Mixed Market Signals Regarding FLNC
Fluence Energy has an average rating of buy and target prices ranging from $38.0 to $18.0. At its current price of $25.0, the company is trading -14.34% away from its target price of $29.19. 19.5% of the company's shares are linked to short positions, and 65.2% of the shares are owned by institutional investors.
| Date Reported | Holder | Percentage | Shares | Value |
|---|---|---|---|---|
| 2023-03-31 | Siemens Ag | 34% | 39,738,064 | $993,650,256 |
| 2023-03-31 | Siemens Pension Trust E.V. | 16% | 18,848,631 | $471,310,002 |
| 2023-03-31 | BNP Paribas Asset Management Holding S.A. | 5% | 5,457,436 | $136,463,182 |
| 2023-03-31 | Vanguard Group, Inc. (The) | 3% | 3,870,417 | $96,779,773 |
| 2023-03-31 | Electron Capital Partners, LLC | 2% | 2,529,737 | $63,256,071 |
| 2023-03-31 | Blackrock Inc. | 2% | 2,498,259 | $62,468,964 |
| 2023-03-31 | Handelsbanken Fonder AB | 1% | 1,176,781 | $29,425,407 |
| 2023-03-31 | Schroder Investment Management Group | 1% | 1,182,567 | $29,570,086 |
| 2023-03-31 | FMR, LLC | 1% | 1,137,469 | $28,442,411 |
| 2023-03-31 | Point72 Asset Management, L.P. | 1% | 1,094,860 | $27,376,973 |
