FuelCell Energy, Inc. (FCEL) manufactures, operates, installs, and sells stationary fuel cell power plants for distributed power generation. The company’s SureSource power plants generate electricity and usable heat, which it serves to various markets such as utilities and independent power producers.
The hydrogen economy has been experiencing unprecedented political and business momentum for some time now. According to a McKinsey study titled “Road Map to a US Hydrogen Economy,” hydrogen demand in the U.S. could reach 17 million metric tons by 2030 and 63 million metric tons by 2050.
This puts FCEL in a favorable position to capitalize on the large-scale utilization of hydrogen-powered solutions. We believe that strict government regulations aimed at reducing pollution levels, along with enhanced fuel cell efficiency, should further propel the growth of this company.
FCEL’s continued execution of projects and enhanced production capabilities have helped the stock gain 609.5% over the past year. This impressive performance combined with several other factors has helped FCEL earn a “Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates FCEL:
Trade Grade: A
FCEL is currently trading higher than its 50-day and 200-day moving averages of $7.67 and $3.66, respectively, indicating that the stock is in an uptrend. In fact, the stock’s 501.2% return over the past three month reflects solid short-term bullishness.
For the fiscal third quarter ended July 31, 2020, FCEL’s advanced technologies contract revenue increased 20% year-over-year to $6.90 million. This increase in revenue is primarily attributable to the revenues recognized in connection with the company’s joint development agreement with ExxonMobil Research and Engineering Company.
On December 5, FCEL announced the closing of a public offering of 39.7 million shares of its common stock, which raised gross proceeds of $162.5 million to the company and $95.5 million to the selling stockholders. This should boost the company’s cash balance substantially.
Buy & Hold Grade: B
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers , FCEL is well positioned. The stock is currently trading just 7% below its 52-week high of $16.94, which it hit on January 8.
The company’s total assets grew at a CAGR of 11.2% over the past three years. This can be attributed to the company’s investments in innovative hydrogen technology platforms, and higher commercialization of hydrogen power generation.
Peer Grade: C
FCEL is currently ranked #46 of 87 stocks in the Industrial – Equipment industry. Other popular stocks in this industry are Schneider Electric S.E. (SBGSY), Plug Power Inc. (PLUG) and Ballard Power Systems Inc. (BLDP)
While PLUG beat FCEL by gaining 1198.9% over the past year, SBGSY and BLDP returned 51.4% and 219.3%, respectively, over this period.
Industry Rank: B
The Industrial – Equipment industry is ranked #59 of 123 StockNews.com industries. The companies in this industry provide fuel cell solutions, precision parts, products, and systems for applications serving various customers in end-markets, such as transportation, industrial equipment, consumer products, electronics, and energy, as well as personal care/health care industries.
With more countries adopting stringent regulations to reduce increasing pollution levels, fuel cell infrastructures should witness notable growth going forward. After reeling from the effects of a global pandemic-driven shutdown, the industry should regain momentum due to an improvement in manufacturing, alongside a gradual recovery in demand and substantial business spending on equipment. Also, as more companies in this industry are retooling and re-inventing themselves to enhance the resiliency of supply chains, they are paving the path to long-term success.
Overall POWR Rating: B (Buy)
FCEL is rated “Buy” due to its impressive financials, short and long-term bullishness, solid price momentum, and underlying industry strength, as determined by the four components of our overall POWR Rating.
FCEL has plenty of upside left despite gaining 609.5% over the past year. Increasing adoption of hydrogen-based backup power and the competitive advantages of fuel cell products, such as enhanced efficiency, eco-friendliness, and longer life spans compared to other forms of clean energy, are expected to drive FCEL’s revenue in the coming months.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for FCEL. It has an average broker rating of 2, indicating favorable analyst sentiment. The consensus EPS estimate for the quarter ending January 31, 2021 represents an 80% improvement year-over-year. A consensus revenue estimate of $23.90 million for the next quarter represents a 60.3% increase from the same period last year.
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FCEL shares were trading at $19.05 per share on Tuesday afternoon, up $3.30 (+20.95%). Year-to-date, FCEL has gained 70.55%, versus a 1.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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