BLDP: Ballard Power Systems vs. Bloom Energy: Which Stock is a Better Buy?

The climate migration across the United States along with an incoming Biden presidency indicates major restructuring of the country’s industrial and infrastructure base. Given the current implications of global warming on the economy, ranging from frequent hurricanes to rampant forest fires, this move should lead to sustainable development of the United States over time.

Fuel cell manufacturers Bloom Energy Corporation (BE) and Ballard Power Systems, Inc. (BLDP) have been operating in the front lines of the clean energy sector, providing on-site power generation facilities and back-up power systems internationally. BE and BLDP are expected to soar in upcoming months with President-elect Biden taking charge of the administration, reaping the operational benefits of the $2 trillion plan. With impressive and sustained performance over the past decade, these companies have made a name for themselves in the industry, making them well suited to cash in on the clean energy drive.

Both companies have generated strong returns over the past year. While BE gained 195.1% over this period, BLDP returned 149.7%. In terms of their past six-month performance, BE is the clear winner with a 140% gain versus BLDP’s 80.2% return.

But which stock is a better buy now? Let’s find out.

Latest Developments

BLDP has been recognized for the second consecutive time by the Toronto Stock Exchange as one of the 30 top performing companies in the exchange in terms of price movement. On September 30^th, BLDP completed an at-the-market equity program, generating approximately $250 million in net proceeds.

On October 30^th, BLDP signed a definitive agreement with AUDI AG to alter existing technology development and patent license agreements previously signed under a non-binding Memorandum of Understanding. This deal should expand BLDP’s right to use high performance proton exchange membrane FCgen HPS in commercial cars and trucks. Earlier this month, the company sold its existing unmanned aerial vehicle business assets to Honeywell, as part of its long-term plan to focus on its heavy and medium duty motive markets.

On September 8^th, BLDP announced the first ever 200kW modular unit for primary propulsion power in marine vessels. It also launched an industry leading high-power density fuel stack for vehicle propulsion.

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BLDP recently partnered with MHALE, to develop and sell zero-emission fuel cell systems to provide primary propulsion power in commercial trucks. It is currently expanding its production capacity to 6 times the original limit for manufacturing membrane electrode assemblies for fuel cells. This is expected to make BLDP the largest producer of fuel cell MEAs by 2021.

BE entered into a financial partnership with NextEra (NEE) in July. As per the terms, NextEra purchased a six-megawatt fuel project from BE. The company raised $230 million through a senior note offering in August. In October, BE converted its convertible promissory notes worth $249 million due 2021 to equity. Additionally, the company announced redemption of senior notes worth $79 million due 2024. These cumulative steps should curb BE’s interest burden significantly, as well as improve its debt to equity ratio.

BE and SK Engineering and Construction powered two new clean energy facilities with fuel cell technology in South Korea last month.

Recent Financial Results

BLDP’s revenues increased 4% year-over-year to $25.60 million in the third quarter that ended September 2020. This can be attributed to a 94% increase in the power products platform revenues to $15.30 million. Cash from operating activities increased 18% over this period, leading to a 136% year-over-year rise in cash reserves to $361.70 million.

BE, on the other hand, reported a 6.6% sequential increase in its total revenue to $200.30 million in the third quarter that ended September 2020. Adjusted EBIDTA increased 1,219% sequentially to $27.70 million, while acceptances increased 2.6% from the prior quarter to 314. Gross margin (excluding SBC) improved 1,320 basis points sequentially to 29.7%.

Past and Expected Financial Performance

BLDP’s revenue and total assets grew at CAGRs 1.7% and 47.5%, respectively, over the past three years. Comparatively, BE’s revenue and total assets increased at CAGRs 33.6% and 6% respectively, over the same time period.

Analysts expect BLDP’s EPS to rise 33.3% in the next quarter (ending March 2021), and 31.6% next year. Consensus revenue estimates indicate a 32% increase in the next quarter, and a 26.9% rise next year.

On the other hand, BE’s EPS is expected to grow 85.3% in the next quarter, and 96.9% next year. Analysts expect the company’s revenue to grow 33.2% in the next quarter, and 25.7% next year.

Profitability

BE’s trailing 12-month revenue is 6.45 times what BLDP generates. BE is also more profitable with a gross margin of 22.9% compared to BLDP’s 20.5%.

Valuation

In terms of trailing 12-month Price/Sales, BLDP, currently trading at 35.23x, is 90.9% more expensive than BE, which is currently trading at 3.22x. BLDP is also more expensive in terms of trailing 12-month EV/Sales (35.05x versus 5.27x).

POWR Ratings

BE is rated a “Buy” in our proprietary POWR Ratings system, while BLDP is rated “Neutral.” Here’s how the four components of the POWR Ratings are graded for both these stocks:

BE has a “B” for Trade Grade and Industry Rank, and a “C” for Buy & Hold Grade and Peer Grade. It is currently ranked #37 out of 59 stocks in the Industrial – Equipment industry.

BLDP has a “B” for Industry Rank, a “C” for Trade Grade and Buy & Hold Grade, and a “D” for Peer Grade. It is ranked #34 in the same industry.

The Winner

At a relatively cheaper valuation, BE presents a higher capital appreciation potential, with higher EPS and revenue growth rates.

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BLDP shares were trading at $17.33 per share on Wednesday morning, up $0.05 (+0.29%). Year-to-date, BLDP has gained 141.36%, versus a 13.77% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...