PLUG: Plug Power vs. Bloom Energy: Which Stock is a Better Buy?

Though the coronavirus has been the limelight of 2020 with millions in casualties worldwide, the climate change crisis also stole some of the focus, as forest fires raged across continents, coupled with frequent floods, volcanoes and other forms of natural disasters. As millions of people have been displaced from their houses, with widespread destruction, not to mention loss of natural ecosystem and wildlife, approximately one in 6 Americans have expressed concerns over the impending climate change crisis.

The United States’ stance is still unclear regarding this crisis, as the two electoral candidates have widely different opinions regarding this matter. Though the White House’s standpoint on climate change should become clear after November 3rd, companies such as Plug Power, Inc. (PLUG) and Bloom Energy, Inc. (BE) are developing products for those willingly wanting to make a switch.

Both PLUG and BE use hydrogen fuel cell technology to generate clean energy. However, while PLUG has applications in the transportation, telecommunications and utility sector, BE focuses on on-site power and grid, and utility support.

Despite the energy sector being labelled as one of the worst performers in 2020, due to the COVID driven business shut down causing oil prices to crash earlier this year to negative values, PLUG and BE demonstrated exceptional business strength. Both companies reported significant gains year-to-date. While PLUG gained 343% over this period, BE returned 69.2%. In terms of past year performance as well, PLUG is the winner with 430.3% gains versus BE’s 327% returns.

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

Latest Movements

PLUG recently announced the development of three GenDrive fuel cell products for European industrial and material handling vehicles. It partnered with Apex Clean Energy in September to develop a green hydrogen network across the United States using wind power. This partnership is in tune with PLUG’s goal to decarbonize and use 50% green hydrogen across major industries in the country by 2024. The company also partnered with Brookfield Renewable Partners to acquire 100% of Brookfield’s renewable energy supplies.

PLUG announced a Memorandum of Understanding (MoU) for demonstrating Plug Power’s ProGen Fuel Cell engine in class 6 and class 8 vehicles which are expected to hit the market by early 2021. It developed a 1kW Progen Fuel Cell system for drone and robotics applications as well. The company has standing agreements with Universal Hydrogen and EnergyOR to develop hydrogen-powered commercial aircrafts, automated guided vehicles and unmanned aerial vehicles.

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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. In October, BE converted promissory notes to equity, thereby eliminating its debt burden. It currently plans on redeeming its senior notes issued in the past by November, thereby alleviating its interest burden.

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

Recent Financial Performance

PLUG’s second-quarter revenues increased 18.3% year-over-year to $68.07 million. Adjusted EBITDA increased 112.6% from the same period last year to $1.22 million. It delivered record gross billings of $72.40 million over this period.

BE, on the other hand, reported a 6.6% sequential increase in its total revenue to $200.30 million in the third quarter ended September 2020. The company reported adjusted EBITDA of $27.70 million, with a gross margin of 28% in its preliminary financial results.

Past and Expected Financial Performance

PLUG’s total assets increased at a CAGR of 65.2% over the past three years. Analysts expect PLUG’s EPS to increase 22.2% in the current year, and 17.9% next year. Revenue is expected to rise 33.1% in the current year, and 34.8% next year.

BE’s total assets grew at a CAGR of 6% over the past three years. Analysts expect its EPS to increase 40.8% in the current year and 93.4% next year. BE’s revenue is expected to grow 3.9% in the current year, and 26% next year.

Profitability

BE’s trailing 12-month revenue is 2.88 times what PLUG generates. BE is also more profitable with a gross margin of 21.7% versus PLUG’s 8.4%.

Valuation

In terms of trailing 12-month price/sales, PLUG is currently trading at 15.06x, 603.7% more expensive than BE, which is currently trading at 2.14x. PLUG’s trailing 12-month EV/sales of 22.74x is 526.4% higher than BE’s 3.63x.

Thus, BE is a more affordable stock here.

POWR Rating

While PLUG is rated “Neutral” in our proprietary POWR Ratings system, BE is rated “Sell”. Here’s how the four components of overall POWR Rating are graded for both these stocks:

PLUG holds a “C” for Trade Grade, Buy & Hold Grade and Peer Grade, and “B” for Industry Rank. It is currently ranked #24 out of 58 stocks in the Industrial – Equipment sector.

BE has an “F” for Trade Grade and Buy & Hold Grade, “D” for Peer Grade, and “B” for Industry Rank. It is currently ranked #41 in the same sector.

The Winner

While both companies have reported remarkable results despite the pandemic driven market shock, PLUG is the better buy here. While BE is relatively undervalued and more profitable, PLUG’s higher revenue growth potential based on its recent developments justifies its premium valuation.

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PLUG shares were trading at $15.44 per share on Monday afternoon, up $1.44 (+10.29%). Year-to-date, PLUG has gained 388.61%, versus a 3.65% 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...