What You Need to Know About Fluence Energy as Its Shares Soar

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
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.