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Nicholas Kitonyi
Nicholas Kitonyi
Articles (404)  | Author's Website |

Does FuelCell Energy Have More Room to Run?

The stock gained more than 10% after reporting earnings

January 21, 2021 | About:

Shares of electrical equipment company FuelCell Energy Inc. (NASDAQ:FCEL) gained more than 10% on Thursday morning. The company announced fourth-quarter 2020 earnings before the opening bell that missed analysts' expectations.

Shares of the company gained more than 668% between Nov. 5 and Jan. 12 before pulling back in the final days leading up to the announcement of its quarterly results. Thursday's post-earnings rebound came despite reporting revenue and earnings that fell short of expectations. This suggests there may be more room left to run in 2021.

Highlights from recent quarterly results

FuelCell's loss per share fell by 33.33% to 8 cents. The market was expecting a loss of 4 cents per share.

The company's revenue for the quarter rose 53.96% to $17 million, which was still lower than the consensus Street estimate of $17.05 million.

FuelCell reported an adjusted Ebitda loss of $17.7 million, which was a significant improvement from the prior-year quarter's equivalent of $31.4 million loss. The company's bottom line could improve in the coming quarters after paying off all amounts owed in credit and preferred shares at the start of the year.

The company has invested heavily in green energy technology. Analysts say this could begin to pay off once President Joe Biden starts to implement his plan of increasing renewable energy use in the U.S.

FuelCell President and CEO Jason Few said the company is pursuing four key products in its plan to boost long-term growth, which include "distributed generation, distributed hydrogen, long-duration hydrogen energy storage and power generation as well as electrolysis, and carbon capture, sequestration, and utilization (CCSU)." Analysts attribute FuelCell's recent rise in stock price to green hydrogen opportunities in the energy sector.

The company appears to be in a strong position to benefit from the expected growth of the sector.

Valuation

From a valuation perspective, shares of FuelCell are currently trading at a price-sales ratio of 91.74. It is yet to break-even on a trailing 12-month basis, but this could change once the products it has invested in pay off.

The company launched its powerhouse business strategy a year ago whose first pillar, transform, is meant to help it build a strong financial foundation. Few said that FuelCell has already made progress in this regard and will begin to focus on "operational and commercial excellence" while maintaining a shrewd capital stricture. This is already beginning to pay off as seen in the most recent quarterly results, where both the top and bottom lines improved significantly.

The company's close peer, Plug Power Inc. (NASDAQ:PLUG), is also running on a negative bottom line. Like FuelCell, it witnessed a massive rally before pulling back this week. It currently trades at a price-sales ratio of 103.04.

In summary, it looks like investors are betting on FuelCell based on its potential for growth rather than current valuation multiples. As such, this may not be the stock for those looking for a quick return, but those that are patient enough to wait for the company to seize its opportunity in the rapidly growing industry.

Disclosure: No positions in the stocks mentioned.

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About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

Visit Nicholas Kitonyi's Website


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