Cheniere Energy (NYSE: LNG) is an energy company based in Texas, which owns and operates liquefied natural gas pipelines and terminals. The company’s current market price is $79.91 per share.
In 2014, LNG’s customers have signed contracts totaling over 7 million tons of liquefied natural gas. The company capitalizes on an IRS approved loophole that removes the double taxation placed on dividends for natural energy pipelines.
LNG’s stock price started 2014 at $43.94 and closed at $79.91 on September 26, 2014, representing an 81% increase. The 50 day moving average is currently $79 per share. LNG has surpassed its 50 day moving average only once in the past year. Otherwise, this trend line has supported the price. Thus, the company is currently trading at an attractive price.
There are several risks associated with an investment in LNG:
Current Momentum: The one year return of LNG is 141% yet the three month return is only 18.5% and the one month return is only 3.3%.
Low Annual Revenue: LNG’s annual revenues have not exceeded $291 million despite possessing a market capitalization of approximately $19 billion.
High Valuation: The company has a book value of only $0.75 per share, compared to its current market price of approximately $80.00 per share.
Volatility of Natural Gas Price: The price of natural gas fluctuates constantly and can drive or avert business to LNG. The company attempts to limit its exposure to natural gas prices by locking in its clients into longer term contracts.
Overall, there are significant risks that outweigh a purchase of LNG at this time.