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Most fuel cell stocks are small today, but a bigger dog is on the way. Image source: Getty Images.
Right now, just three hydrogen fuel cell stocks are basically synonymous with fuel cell-produced energy in America: FuelCell Energy, Plug Power, and Ballard Power Systems. The three stocks are similar in...
- Size -- less than $500 million in market capitalization each
- Revenue -- about $100 million, give or take a few tens of millions
- Profits -- as in, none of them are earning any.
Here's a quick rundown of the "big" three fuel cell stocks:
Data source:Yahoo! Finance.
Now, these companies are similar at first glance. Still, a few things jump out of the above chart that illustrate the differences among these three hydrogen fuel cell stocks.
Specializing in stationary fuel cell power plants for electricity generation, FuelCell Energy boasts the biggest revenue stream of the three main publicly traded fuel cell stocks -- but investors are valuing it at the smallest market capitalization. Perhaps this is because among the three stocks named, FuelCell sports arguably the worst record of growing its revenue.
According to data from S&P Global Market Intelligence, FuelCell Energy's revenue has actually shrunk by an average of 7% per year over the past three years.
Like FuelCell Energy, Plug Power produces fuel cells for stationary electric power generation, but the company also produces fuel cell packs for powering "material handling vehicles" (think forklifts). This diversification in its business model, however, isn't doing Plug any favors. To the contrary, Plug remains deeply unprofitable, and sports a revenue stream just two-thirds the size of FuelCell's -- but boasts a market cap more than twice as big!
Why? Growth could be the answer here as well. S&P Global data shows that over the past three years at least, Plug Power has achieved the strongest revenue growth rate of the three companies named above: 55%. (Albeit, its growth rate over the past year was just 6%.) Plug also earns the weakest gross profit margins of the three fuel cell companies -- just half of one percent.
Last but not least, we come to Ballard Power. Once a pioneer in the development of fuel cells to power personal vehicles, Ballard has shifted its focus lately. For example, some of Ballard's greatest successes in recent years have come from selling fuel cell systems to power buses in China. Ballard also develops fuel cell solutions for portable power, for material handlers, and as backup power systems for telecom equipment.
Investors have rewarded Ballard's diverse field of business interests with the highest market capitalization of the three fuel companies discussed so far. Indeed, Ballard's is the only stock of the three to have grown in value over the past year -- up nearly 40%. While Ballard currently boasts the smallest revenue stream of these three fuel cell companies, and has only a middling revenue growth rate historically, its revenue grew 43% over the past year.
Perhaps best of all, with a gross profit margin of 25%, Ballard is arguably the best fuel cell stock for investors looking to earn profits from this technology.
Which is the best fuel cell stock to buy right now?
Ballard Power's high operating costs and small revenue stream continue to burden the company with operating losses -- and on the bottom line, net losses as well. Still, operating costs as a percentage of revenue have been generally declining in recent years. If Ballard can continue growing its revenue, and keep a tight rein on expenses, there's at least a faint hope that it might one day earn a profit.
That alone could make it the best fuel cell stock to invest in today.
Which fuel cell stock might be the best buy tomorrow?
One final note: Ballard Power may be the best fuel cell stock currently available for investment -- but it's still unprofitable and selling for more than 4.5 times annual revenue, which isn't exactly cheap. Investors with a bit more patience, though, may be treated to an even more attractive investment option.
Privately held fuel cell operator Bloom Energy is reportedly preparing to IPO, and with annual revenue in the neighborhood of $400 million (according to S&P Global data) Bloom's fuel cell business is already bigger than that of the "big three" publicly traded fuel cell companies, combined.
How much Bloom Energy will cost when it IPOs -- and whether the stock will be worth that price -- remains to be seen. But whether or not Bloom turns into a good investment, investors in any of the other big three fuel cell companies need to be aware that an even bigger dog is about to come on the market, lest they get bit when it arrives.
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Rich Smithdoes not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handleTMFDitty, where he's currently ranked No. 330 out of more than 75,000 rated members.
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