Westport is in the business of building engine conversion technologies, and it has partnerships with giants like Caterpillar Inc. (NYSE:CAT) and Cummins Inc. (NYSE:CMI), which shows that big industry players have a clear interest in LNG a as a fuel. Westport has been increasing sales rapidly over the last years, and gross margins are on the rise too. The problem is that R&D expenses keep the company unprofitable at the bottom line.
On a standalone basis, however, some joint ventures like the one with Cummins or another one with Chinese company Weichai are already delivering profits, so overall profitability at the company level may not be too far away. Needless to say, this could provide a great catalyst for the stock.
Clean Energy Fuels, on the other hand, will most likely remain unprofitable for a long time, since the company is heavily investing to build America’s Natural Gas Highway: a network of LNG truck fueling stations on Interstate Highways and in major metropolitan areas.
This requires tons of capital, but it also provides the company with a very unique asset base which could be of enormous value in a natural future in which many vehicles are fueled by natural gas.
Westport intends to provide the technologies for the engines, and Clean Energy is building the fueling stations, so both companies are mutually dependent on each other. Perhaps for this reason, they recently launched a joint marketing program
The companies will bundle the Westport LNG Tank System – or the new Cummins Westport ISX12 G engines – and a long-term fuel contract with Clean Energy into a package for qualified customers. It´s nice to see that Westport and Clean Energy are joining forces to foster the transition towards LNG, and investors in both companies have a lot to gain if their succeed in their efforts.
Bottom Line
The natural gas revolution is barely in its first stages, and it will provide many opportunities for investors over the next years. Although producers like Chesapeake are facing big uncertainties regarding prices and profitability, pipelines like Enterprise seem much more solid and reward investors with an attractive dividend yield.
If you have the stomach to withstand the volatility, and a long enough investment horizon, disruptive plays like Westport or Clean Energy could deliver amazing returns if LNG continues gaining traction as the fuel of the future.
The article The Best Way to Invest in the Natural Gas Revolution originally appeared on Fool.com is written by Andrés Cardenal.
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