Approximately two weeks ago, Cheniere Energy (LNG) celebrated their 100th Liquefied Natural Gas Cargo delivery from their Sabine Pass liquefaction facility. This marks a milestone for American Liquid Natural Gas. To-date, LNG has delivered cargoes to 18 different countries, in five continents. For those who do not know, LNG is currently the only operational US exporter of Liquefied Natural Gas to the world, and this is just to beginning…
For starters, we have to look at the product that LNG delivers…natural gas. Natural gas is still very cheap, in relation to other fossil fuels, such as oil. In fact, many large buildings are converting their fuel systems into natural gas (and, in turn, reducing their consumption in oil) because it’s cheaper and cleaner to run. (Actually, I can attest to this because I work in the real estate industry and have seen pretty much all the buildings in our portfolio convert to natural gas.) Recently, there’s also been a surge in Liquid Natural Gas in the Asian and European markets. So all-in-all, natural gas is here to stay. Not only is it here to stay, but there is growing demand for this type of fuel.
In the most recent quarter, LNG turned profitable for the very first time. Chances are that it will continue to be profitable in the foreseeable future. See below charts for earnings trends.
As we can see in this chart, Liquid Natural Gas exporter became profitable for the first time since its inception:
In this chart, we can see revenues surging, as losses narrow going from 2015 into 2016.
This chart shows LNG beating Wall Street Analyst estimates, and becoming profitable, in the most recent quarter ending in 2016.
LNG is still relatively undervalued. Something that I like to use to determine valuation is by comparing a company’s Enterprise Value vs. its Market Capitalization. Currently, LNG’s EV = $32 Billion vs. Market Cap = $11 Billion. As you can see:
LNG’s Enterprise Value $32 Billion > Market Capitalization $11 Billion
Through this quick comparison, we can see that the company is undervalued.
Big Institutions: The Real Market Movers
To top it all off, many institutions own and follow LNG, including Vanguard, JP Morgan Chase, Goldman Sachs, BlackRock, Fidelity, and Deutsche Bank. And let’s not forget about the infamous Carl Icahn, who has a large sizeable position in this company. Love him or hate him, we cannot deny that he is one of the most outstanding investors of our time. Institutional investors are the major movers of stocks. You can have a great company, making a ton of money, but if there’s no institution following, then the stock is not going to go anywhere. With LNG, we do not have to worry about the lack of institutional money and attention.
Other Notable Metrics
Cheniere Energy’s quarterly top-line soared from $68.4 million, a year ago, to $571.6 million, at the end of 2016. This equates to a 735.67% quarterly revenue growth, year-over-year. Recently, short interest in LNG’s stock decreased from 8.1%, last year, to currently, 5.3%. This means short-sellers, who are betting on LNG’s decline, are less confident that the stock will go down.
*Quick disclosure: LNG was brought to my attention from one of my cousins, who’s pretty well-connected in the Energy Industry. I have been following this company ever since. It was not until lately, when my watch-list was giving me multiple alerts on Cheniere. (Please note that my analysis does not constitute as a recommendation for investment purposes, and that such investment can and may incur losses due to the risk and volatility associated with equities and the stock market.)