Utilities - Renewable company Fluence Energy is standing out today, surging to $19.58 and marking a 10.1% change. In comparison the S&P 500 moved only 1.0%. FLNC is -29.97% below its average analyst target price of $27.96, which implies there is more upside for the stock.
As such, the average analyst rates it at buy. Over the last year, Fluence Energy has underperfomed the S&P 500 by 45.4%, moving -18.3%.
Fluence Energy, Inc., through its subsidiaries, offers energy storage products and solution, services, and artificial intelligence enabled software-as-a-service products for renewables and storage applications in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company is a utility stock. Historically, the utilities sector has proven to be a safe haven during economic downturns, as they provide an essential service that is always in demand. Investors also tend to choose these stocks because they generally pay attractive dividends. But there is no telling if this will continue in the future.
Utilities tend to have high debt levels because of the enormous capital requirements of maintaining their infrastructure. In periods of rising interest rates, a high debt load can prove disastrous for a company. Another source of uncertainty facing the sector is the imminent rollout of new Federal clean power regulations which will increase costs for utilities, but also provide subsidies for the sector — at least initially.
Fluence Energy does not release its trailing 12 month P/E ratio since its earnings per share of $-0.17 are negative over the last year. But we can calculate it ourselves, which gives us a trailing P/E ratio for FLNC of -115.2. Based on the company's positive earnings guidance of $0.68, the stock has a forward P/E ratio of 28.8.
The P/E ratio is the company's share price divided by its earnings per share. In other words, it represents how much investors are willing to spend for each dollar of the company's earnings (revenues minus the cost of goods sold, taxes, and overhead). As of the second quarter of 2024, the utilities sector has an average P/E ratio of 20.3, and the average for the S&P 500 is 28.21.
The main limitation with P/E ratios is that they don't take into account the growth of earnings. This means that a company with a higher than average P/E ratio may still be undervalued if it has high projected earnings growth. Conversely, a company with a low P/E ratio may not present a good value proposition if its projected earnings are stagnant.
When we divide Fluence Energy's P/E ratio by its projected 5 year earnings growth rate, we obtain its Price to Earnings Growth (PEG) ratio of 0.91. Since a PEG ratio of 1 or less may indicate that the company's valuation is proportionate to its growth potential, we see here that investors are undervaluing FLNC's growth potential .
To better understand the strength of Fluence Energy's business, we can analyse its operating margins, which are its revenues minus its operating costs. Consistently strong margins backed by a positive trend can signal that a company is on track to deliver returns for its shareholders. Here's the operating margin statistics for the last four years:
| Date Reported | Total Revenue ($ k) | Operating Expenses ($ k) | Operating Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 2,217,978 | 136,308 | -5 | 79.17 |
| 2022 | 1,198,603 | 116,710 | -24 | 0.0 |
| 2021 | 680,766 | 38,162 | -24 | -242.86 |
| 2020 | 561,323 | 17,940 | -7 |
- Average operating margins: -15.0 %
- Average operating margins growth rate: 31.4 %
- Coefficient of variability (lower numbers indicate less volatility): 1118.7 %
Fluence Energy's financial viability can also be assessed through a review of its free cash flow trends. Free cash flow refers to the company's operating cash flows minus its capital expenditures, which are expenses related to the maintenance of fixed assets such as land, infrastructure, and equipment. Over the last four years, the trends have been as follows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | -111,927 | 2,989 | -114,916 | 60.42 |
| 2022 | -282,385 | 7,934 | -290,319 | -7.7 |
| 2021 | -265,269 | 4,292 | -269,561 | -1606.51 |
| 2020 | -14,016 | 1,780 | -15,796 |
- Average free cash flow: $-172648000.0
- Average free cash flown growth rate: 7.0 %
- Coefficient of variability (lower numbers indicating more stability): 0.0 %
If it weren't negative, the free cash flow would represent the amount of money available for reinvestment in the business, or for payments to equity investors in the form of a dividend. While a negative cash flow for one or two quarters is not a sign of financial troubles for FLNC, a long term trend of negative or highly erratic cash flow levels may indicate a struggling business or a mismanaged company.
Another valuation metric for analyzing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present liquidation value of the company, as if it sold all of its assets and paid off all debts.
Fluence Energy's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 5, so the company's assets may be overvalued compared to the average P/B ratio of the Utilities sector, which stands at 2.25 as of the second quarter of 2024.
Fluence Energy is by most measures overvalued because it has a negative P/E ratio., a higher than Average P/B Ratio, and negative cash flows with an upwards trend. The stock has poor growth indicators because it has a no PEG ratio and negative operating margins with a positive growth rate. We hope you enjoyed this overview of FLNC's fundamentals.
