End-to-end clean hydrogen and zero-emissions fuel cell solutions provider Plug Power Inc. (PLUG) has reportedly started production at its $94 million factory in the Vista Technology Campus in Bethlehem. The company aims to expand its business to achieve its $1.40 billion revenue in 2023 and break-even operating margin.

However, the company could not surpass analysts’ earnings and revenue expectations in the third quarter. Its EPS missed the consensus estimate by 28.3%, and its topline fell short of the estimate by 23.7%.

Moreover, last month PLUG’s Chief Strategy Officer Sanjay Shrestha told analysts that the company had cut its hydrogen production forecast from 70 tons to about 50 tons of green hydrogen per day by year-end after abandoning plans for two plants and experiencing permitting delays at a third facility.

The stock has declined 58.5% over the past year and 36.6% year-to-date to close its last trading session at $17.89. Moreover, it is trading lower than its 50-day moving average of $20.91 and its 200-day moving average of $21.71.

Here are the factors that could influence PLUG’s performance in the near term:

Stretched Valuation

In terms of forward EV/Sales, PLUG is trading at 10.43x, 520% higher than the industry average of 1.68x. The stock’s forward Price/Sales multiple of 12.61 is 862.7% higher than the industry average of 1.31. Moreover, in terms of its forward Price/Book, it is trading at 2.71x, 2.3% higher than the industry average of 2.65.

Weak Bottom Line

For the fiscal third quarter ended September 30, PLUG’s net revenue increased 31.1% year-over-year to $188.63 million. However, its net loss rose 60.1% from the prior-year quarter to $170.76 million. Net loss per share increased 57.9% year-over-year to $0.30.

Bleak Profitability

PLUG’s trailing-12-month EBITDA margin and net income margin of negative 92.55% and 107.91% compare to the industry averages of 13.02% and 6.80%, respectively. Its trailing-12-month ROCE, ROTC, and ROTA of negative 15.53%, 7.54%, and 11.84% compare to their respective industry averages of 14.31%, 6.83%, and 5.32%.

POWR Ratings Reflect Bleak Prospects

PLUG’s POWR Ratings reflect the company’s bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PLUG has a Value grade of D, in sync with its higher-than-industry valuation. It also has a D grade for Growth, which is justified by its widening losses.

The stock has an F grade for Quality, consistent with its bleak profitability.

In the 89-stock Industrial – Equipment industry, it is ranked last.

Click here to see the additional POWR Ratings for PLUG (Momentum, Stability, and Sentiment).

View all the top ratings in the Industrial – Equipment industry here.

Bottom Line

Although PLUG is attempting ambitious expansions, the company’s bottom line still remains negative. Moreover, the company has cut its production outlook. Given its bleak bottom line and profitability scenario, the stock might be best avoided now.

How Does Plug Power Inc. (PLUG) Stack up Against Its Peers?

While PLUG has an overall POWR Rating of F, one might consider looking at its industry peers, LSI Industries Inc. (LYTS) and Preformed Line Products Company (PLPC), which have an overall A (Strong Buy) rating, and Konica Minolta, Inc. (KNCAY) and OMRON Corporation (OMRNY), which have an overall B (Buy) rating.

PLUG shares were trading at $17.34 per share on Monday afternoon, down $0.55 (-3.07%). Year-to-date, PLUG has declined -38.58%, versus a -14.91% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

More Resources for the Stocks in this Article