Plug Power Inc. (PLUG) delivers end-to-end clean hydrogen and zero-emissions fuel cell solutions for supply chain and logistics applications, on-road electric vehicles, stationary power markets, and others in North America and internationally.

On September 8, 2022, PLUG and Lhyfe, a pure player in renewable green hydrogen, co-ordered ten 5-MW European manufactured PEM (proton exchange membrane) electrolyzer systems for the production of green hydrogen across multiple European plants.

In addition, on August 25, 2022, PLUG signed a hydrogen supply deal with Amazon.com, Inc. (AMZN) to provide liquid green hydrogen from 2025 and assist AMZN in meeting its net-zero carbon commitment by 2040. This collaboration with the retail giant should be strategically beneficial for PLUG.

Over the past month, the stock has gained 21.3% and 6% year-to-date to close the last trading session at $29.31. However, it has lost 13.1% over the past nine months.

Here is what could shape PLUG’s performance in the near term:

Weak Bottom-line Performance

For the second quarter that ended June 30, 2022, PLUG’s operating loss came in at $146.91 million, up 63.9% year-over-year. Its net loss increased 73.9% year-over-year to $173.30 million, while its loss per share came in at $0.30, up 66.7% year-over-year.

Stretched Valuations

In terms of its forward EV/S, PLUG’s 16.37x is 889.3% higher than the industry average of 1.65x. Its forward P/S of 18.85x is significantly higher than the industry average of 1.23x. Moreover, its forward Price/Book of 4.37x is 73% higher than the industry average of 2.52x.

Poor Profit Margins

PLUG’s trailing-12-month gross profit margin of negative 20.03% is lower than the industry average of 29.10%. Also, its trailing-12-month negative EBITDA margin of 89.05% is lower than the industry average of 12.94%, while its trailing-12-month net income margin of negative 105.26% is lower than the industry average of 6.73%.

Furthermore, PLUG’s trailing-12-month ROCE, ROTC, and ROTA of negative 13.73%, 6.62%, and 10.98%, are lower than the industry averages of 14.29%, 6.68%, and 5.11%, respectively.

POWR Ratings Reflect Bleak Prospects

PLUG has an overall rating of F, equating to Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

PLUG has a D grade for Value, consistent with its higher-than-industry valuation multiples. It has an F grade for Quality, in sync with its lower-than-industry profitability margins.

Moreover, it has a D grade for Growth, in sync with its bleak bottom line performance.

In the 92-stock Industrial – Equipment industry, PLUG is ranked #87. The industry is rated C.

Click here for the additional POWR Ratings for PLUG (Momentum, Stability, and Sentiment). View all the top stocks in the Industrial – Equipment industry here.

Bottom Line

Although the company’s recent collaborations could prove beneficial, its bleak fundamentals are concerning. Analysts expect PLUG’s EPS to fall 40% per annum for the next five years. Moreover, its EPS is expected to remain negative until 2023. Given such a grim outlook, I think PLUG 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, Preformed Line Products Company (PLPC), nVent Electric plc (NVT), and Belden Inc. (BDC), which have an overall A (Strong Buy) rating.

PLUG shares were trading at $29.86 per share on Monday afternoon, down $0.06 (-0.20%). Year-to-date, PLUG has gained 5.77%, versus a -12.98% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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