Westport Innovations Inc. (USA) (WPRT), Fuel Systems Solutions, Inc. (FSYS): Which Of These Natural Gas Leaders Should You Buy?

In any industry, investors weigh the relative merits of the best growth stocks versus the best value stocks.

And in the race to tap into the burgeoning natural gas vehicle market, the growth stock has typically ruled the day. Westport Innovations Inc. (USA) (NASDAQ:WPRT) has become quite well known among energy industry investors while rival Fuel Systems Solutions, Inc. (NASDAQ:FSYS), a struggling value stock, disappeared off radars.

Back in April, I suggested that investors should give Fuel Systems Solutions a fresh look, as a solid near-term catalyst was in place: General Motors Company (NYSE:GM) was gearing up to launch new pickup trucks with Fuel Systems Solutions, Inc. (NASDAQ:FSYS)’ compressed natural gas (CNG) engines. And shares are up more than 30% since then. I still think Fuel Systems Solutions, Inc. (NASDAQ:FSYS) is a solid investment opportunity, but I also think it’s time to give Westport Innovations Inc. (USA) (NASDAQ:WPRT) — the former industry high-flier — a fresh look.

While shares of Fuel Systems Solutions, Inc. (NASDAQ:FSYS) have been surging, shares of Westport Innovations have been sliding. But for Westport Innovations Inc. (USA) (NASDAQ:WPRT), the rewards are starting to outweigh the risks.

As a quick primer, Fuel Systems Solutions, Inc. (NASDAQ:FSYS) is mostly focused on smaller natural gas engines suitable for cars and light trucks, while Westport Innovations Inc. (USA) (NASDAQ:WPRT) is taking the big rig market. Truck engines can be up three times the size of car engines and, thanks to their complexity, can cost 10 times as much. Thanks to a recent acquisition, Westport is moving downstream as well with plans to build engines for Ford Motor Company (NYSE:F)’s F-150 pickup in early 2014.

At first glance, it might seem surprising that Fuel Systems Solutions, Inc. (NASDAQ:FSYS) has been the better stock. The company concedes that sales are likely to grow less than 10% to 15% in 2014, while Westport Innovations Inc. (USA) (NASDAQ:WPRT) is guiding toward 50% top-line growth next year. And in years past, Westport has delivered solid growth, with sales rising from $37 million 2006 to more than $150 million in 2012.

Yet 2013 is now shaping up to be a very tough year for Westport Innovations Inc. (USA) (NASDAQ:WPRT) as a pair of new engine programs are off to a slow start. The company’s massive new 15-liter engines, which are optimized for heavy loads, are still being tested by key fleet buyers, and large orders have been slow to materialize. And the company’s joint venture in China, while growing quickly, is not growing as fast as analysts had expected. Still, it’s hard to see 133% year-over-year quarterly growth as a disappointment. Also, the company is seeing a sharp drop in customer-funded research and development compared with a year ago.

[Note: My colleague Andy Obermueller has been way ahead of the crowd on natural gas — and Westport in particular. He discussed how natural gas will change the U.S. economy and “make a fortune for investors” in this interview.]

The real problem — and the reason I have not been a huge fan of this stock — is an inability to see a path to profitability. Indeed, we are at least a few years away from positive net income. But investors should pay closer attention to cash flow rather than profits. And on that metric, Westport is reaching an inflection point.