PLUG: Plug Power vs. Ballard Power Systems: Which Stock is a Better Buy?

Plug Power (PLUG) and Ballard Power Systems, Inc. (BLDP) are leading proton exchange membrane (PEM) fuel cell manufacturing companies. While PLUG and BLDP generate clean energy from hydrogen, PLUG has applications in the telecommunications, transportation, and utility sector, and BLDP’s fuel cell power products are used in heavy-duty motive, portable power, and material handling and backup power.

Both PLUG and BLDP have generated significant returns over the past five years. While PLUG gained 555.6% over this period, BLDP returned 1052.7%. However, in terms of year-to-date performance, PLUG is the clear winner with a 418.7% gain versus BLDP’s 140.8% returns. But which stock is the better buy now? Let’s find out.

Latest Movements

On September 24th, PLUG announced its collaboration with Apex Clean Energy 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. It 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. PLUG developed a 1kW Progen Fuel Cell system for drone and robotics applications as well.

PLUG has standing agreements with Universal Hydrogen and EnergyOR to develop hydrogen-powered commercial aircraft, automated guided vehicles, and unmanned aerial vehicles.

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 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.

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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.

Recent Financial Results

PLUG’s second-quarter revenues increased by 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.

BLDP’s revenues increased 9% from the prior-year quarter to $25.80 million for the second quarter ended June 2020. This can be attributed to the 62% growth in power products platform revenue.

Past and Expected Financial Performance

PLUG’s revenue and total assets increased at a CAGR of 45.4% and 65.2%, respectively, over the past three years. Analysts expect PLUG’s revenue and EPS to increase 35.6% and 17.9%, respectively, next year.

BLDP’s revenue grew at a CAGR of 5.1% over the past three years while total assets rose 26.8% over this period. Analysts expect the company’s revenue and EPS to rise by 31.4% and 33.3%, respectively, next year.

Profitability

PLUG’s trailing 12-month revenue is 2.23 times what BLDP generates. However, BLDP is more profitable with a gross margin of 21.8% versus PLUG’s 8.4%.

Valuation

In terms of trailing 12-month price/sales, BLDP is currently trading at 35.06x, 98.9% more expensive than PLUG, which is currently trading at 17.63x. BLDP’s trailing 12-month EV/ sales of 37.34x is 42% higher than PLUG’s 26.29x.

However, BLDP’s trailing 12-month price to book value of 14.42x is lower than PLUG’s 22.74x.

POWR Rating

Both PLUG and BLDP are rated “Buy” in our proprietary POWR Ratings system. Here’s how the four components of overall POWR Rating are graded for each of these stocks:

PLUG has an “A” for Trade Grade, and “B” for Buy & Hold Grade, Peer Grade, and Industry Rank. In the 58-stock Industrial – Equipment sector, PLUG is ranked #7.

BLDP holds an “A” for Trade Grade, “B” for Industry Rank, and “C” for Buy & Hold Grade and Peer Grade. It is ranked #23 out of 58 stocks in the same industry.

The Winner

Both BLDP and PLUG are well-positioned to soar in the upcoming months as people are consciously switching to green energy. However, PLUG is a better buy here, given its impressive past performance and favorable analyst sentiment. In terms of valuation, PLUG is relatively cheaper. PLUG also has a higher growth potential, which should translate into better price appreciation.

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PLUG shares were unchanged in after-hours trading Tuesday. Year-to-date, PLUG has gained 415.19%, versus a 8.22% 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...