FuelCell Energy Inc. (FCEL) and Bloom Energy Corporation (BE) are leading fuel cell power generating companies providing on-site power, utility and grid support. Both FCEL and BE convert natural gas, biogas or hydrogen to electricity. However, the two companies differ in their area of operation. Besides the United States and Korea, FCEL supplies fuel cell power in England and Germany, while BCE operates across China, India and Japan.
Both companies have generated sky-high returns over the past year. While BE gained 526.6% over this period, FCEL returned 698.6%. In terms of six-month performance, BE is the clear winner with 167.2% gain versus FCEL’s 42.9% return. But which stock is the better buy now?
FCEL received $8 million in funding from the U.S. Department of Energy to design and manufacture a SureSource electrolysis platform for producing hydrogen in October. It also agreed to distribute green hydrogen to Toyota to accelerate its fuel cell car and truck adoption, as a part of National Hydrogen and Fuel day celebration.
FCEL raised $177.35 million through a public offering of 50.02 million shares. The company plans to utilize the proceeds for technological advancements and business growth, as well as develop its presence in South Korea and Asian markets.
BE entered into a financial partnership with NextEra in July. As per the terms, NextEra purchased a six-megawatt fuel project from BE. The company raised $230 million through senior notes offering in August.
BE and SK Engineering and Construction powered two new clean energy facilities with fuel cell technology in South Korea last month.
Recent Financial Reports
As the fuel cell industry bore the brunt of the pandemic, with most businesses closed as well as stringent restrictions on transportation and travelling, FCEL announced a year-over-year decline in its earnings in the fiscal third quarter ended July 2020. The company managed to generate $18.73 million in revenues over this period.
BE, on the other hand, reported a 19.9% sequential increase in its total revenue to $187.90 million in the second quarter ended June 2020. Acceptances increased 19.5% sequentially to 306.
Past and Expected Financial Performance
FCEL’s total assets increased at a CAGR of 11.2% over the past three years. However, its revenue declined marginally over this period. Analysts expect FCEL’s EPS to grow 72.4% in the current year and 45% next year. Analysts expect its revenue to increase 19.2% in the current year and 27.7% next year.
BE’s revenue and total assets grew at a CAGR of 13.1% and 1.2% over the past three years. Analysts expect its EPS to increase 43.1% in the current year and 94.4% next year. BE’s revenue is expected to grow 7.3% in the current year, and 26.7% next year.
BE’s revenue is 12.05 times what FCEL generates. BE is also more profitable with a gross margin and ROE of 22.4% and 196.7%, respectively, compared to FCEL’s negative values.
In terms of trailing twelve-month price to sales, FCEL is currently trading at 6.97x, 148% more expensive than BE, which is currently trading at 2.81x. FCEL is also more expensive in terms of trailing 12-month EV/ Sales (4.41x versus 13.17x).
Thus, BE is the more affordable stock.
While BE is rated “Neutral” in our POWR Ratings system, FCEL is rated “Sell”. Here’s how the four components of overall POWR Rating are graded for both these stocks:
FCEL has “D” for Trade Grade, Buy & Hold Grade and Peer Grade, and “B” for Industry Rank. It is currently ranked #41 out of 58 stocks in the Industrial -Equipment sector.
BE has a “B” for Trade Grade and Industry Rank, “C” for Buy & Hold Grade and “D” for Peer Grade. It is ranked #16 in the same industry.
With increasing awareness regarding climate change and higher efficiency compared to combustion engines, the fuel cell industry is expected to skyrocket in the future, benefitting both FCEL and BE. However, at a lower valuation, BE is the better stock at this time.
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FCEL shares were trading at $2.21 per share on Thursday afternoon, up $0.03 (+1.38%). Year-to-date, FCEL has declined -11.95%, versus a 8.42% 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...
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