Natural Gas Engine Payback Narrows
Kicking off "Green Week," Cramer once again sat down with Andrew Littlefair, president and CEO of Clean Energy Fuels (CLNE), in his "Executive Decision" segment. Clean Energy Fuels is set to open 150 natural gas fueling stations this year but its company shares have fallen 15% for the year.
Littlefair said that America's transition to natural gas is finally starting to happen. He said the next generation of truck engines is rolling off the assembly lines and those engines only cost $35,000 more than their diesel counterparts.
With natural gas costing on average $1.50 per gallon less than diesel, the payback on those engines is now just one year, said Littlefair. Just a few years ago, he noted, that difference was $100,000 and in a few more years it will likely be between $10,000 and $15,000.Littlefair said he's not giving up on Congress passing tax incentives on natural gas, but he no longer feels the industry needs to have the bill in order to succeed. "It'll just make it happen faster," he said. So how big is the payoff for America? Littlefair said if just 150,000 of the 3 million trucks on America's roads switched to natural gas, it would reduce oil imports by 1.5 billion gallons and give the U.S. serious leverage over OPEC and foreign oil. Littlefair also mentioned natural gas cars as well. He said that Honda Motor (HMC) announced it is rolling out its natural gas Civic nationwide. And while some consumers are scoffing that natural gas cars sacrifice their trunk space in order to accommodate a natural gas tank, Littlefair said there's no reason why the tanks can't be moved underneath the car once demand picks up. Littlefair and Cramer agreed that America needs this transition in order to be cleaner, to employ more people and to become energy independent, something it can and must do for its long-term well being. Cramer said this quarter was a breakout quarter for Clean Energy Fuels and he remains bullish on the stock.
Meaningful MetricWhen comparing two stocks on price, you have to look at more than just the multiple, Cramer told viewers, as he examined two grocery store chains, SuperValu (SVU) and Whole Foods (WFM) to see which one is cheap and which one is expensive. Cramer said using just the multiple, SuperValu looks cheap at just 6.5 times earnings, while Whole Foods looks extremely pricey at 26 times earnings. But Cramer said that P/E multiples are only half the story, what really matters is how fast these companies are growing. Enter the PEG Ratio, a company's earnings multiple times its growth rate. PEG Ratios make for better comparisons, said Cramer, as stocks are priced on future earnings and investors are willing to pay more for stocks that are growing faster and can deliver more earnings. He said anything with a PEG Ratio over two is expensive while anything under one is cheap. So using this new metric, how do the two grocers compare? Cramer said that Whole Foods has a PEG Ratio of 1.44, which SuperValu is stratospheric with a ratio of 3.48. Cramer explained that SuerValu is much larger than Whole Foods, meaning it has less room to expand and its future is not as bright as its past. Meanwhile, Whole Foods can still triple its store count and is a play on healthy eating to boot. That's why the smart money is on Whole Foods, he said.
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