The fuel cell industry is poised to witness exponential growth in the following months, as the country moves toward green energy. The fuel cell industry is estimated to grow at a CAGR of 25.4% over the next four years, allowing companies such as Fuel Cell Energy, Inc. (FCEL) and Ballard Power Systems, Inc. (BLDP) to flourish over this period.
FCEL has a strategic advantage in the United States, as it already enjoys a significant market share compared to BLDP, which is based in Canada. However, BLDP’s operations across the world have helped the company strengthen its brand recognition on an international scale.
Both companies have generated significant returns over the past year. FCEL has gained 486.2% over this period, while BLDP has returned 132.9%. In terms of past six-month performance as well, FCEL is the clear winner with 167% gains, versus BLDP’s 71.3% returns.
But which stock is a better buy now? Let’s find out.
FCEL received $8 million funding from the US 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 the National Hydrogen and Fuel day celebration. FCEL is currently working on generating solid oxide hydrogen for commercial sale, storage, and power generation.
FCEL raised $177.35 million through a public offering of 50.03 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.
BLDP has been recognized by the Toronto Stock Exchange as one of the 30 top-performing companies in the exchange in terms of price movement twice consecutively. On September 30th, BLDP completed an at-the-market equity program, generating approximately $250 million in net proceeds.
On October 30th, 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 8th, 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.
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.
Recent Financial Results
BLDP’s revenues increased 4% year-over-year to $25.60 million in the third quarter ended September 2020. This can be attributed to the 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.
FCEL’s advanced technologies contract revenues increased 20% year-over-year to $6.90 million in the fiscal second quarter ended July 2020. The company’s total backlog reduced 3.9% from the same period last year to $1.33 billion. Restricted cash and cash equivalents balance improved 605.3% over the last three quarters to $66.30 million.
Past and Expected Financial Performance
FCEL’s total assets increased at a CAGR of 11.2% over the past three years, while BLDP’s total assets grew at a CAGR of 47.5% over this 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.
Analysts expect FCEL’s EPS to grow 80% in the next quarter (ending January 2021), and 48.7% next year. Revenue is expected to increase by 76.1% in the next quarter, and 27.7% next year.
BLDP’s trailing 12-month revenue is 1.81 times what FCEL generates. BLDP is also more profitable with a gross margin of 20.5% compared to FCEL’s negative value.
In terms of trailing 12-month Price/Sales, BLDP is currently trading at 34.48x, much more expensive than FCEL, which is currently trading at 15.45x. BLDP is also more expensive in terms of trailing 12-month EV/ Sales (35.10x versus 25.65x).
FCEL is rated “Buy” in our proprietary POWR Ratings system, while BE is rated “Neutral”. Here’s how the four components of overall POWR Rating are graded for both these stocks:
BLDP has a “B” for Industry Rank, “C” for Trade Grade and Buy & Hold Grade and “D” for Peer grade. It is ranked #34 out of 59 stocks in the Industrial -Equipment sector.
FCEL has “A” for Trade Grade, “B” for Buy & Hold Grade and Industry Rank, and “C” for Peer Grade. It is currently ranked #38 out of 59 stocks in the same group.
As the biggest fuel cell manufacturer in the United States, FCEL is poised to gain significantly from the clean energy transition in the country. The stock is currently trading above its 20-day SMA and EMA of $1.74 and $4.24, respectively, indicating solid short-term bullishness. This is also reflected in the stock’s 118.9% gains over the past month, compared to BLDP’s negative returns. At a relatively lower valuation, FCEL also has higher earnings and revenue growth potential, making it a better buy here.
FCEL shares were trading at $5.15 per share on Thursday afternoon, up $0.05 (+0.98%). Year-to-date, FCEL has gained 105.18%, versus a 12.00% 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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