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Why FuelCell Energy Inc. (FCEL) Is Down Today

NEW YORK (TheStreet) -- FuelCell Energy (FCEL - Get Report) fell 5% to $1.75 a share in morning trading on Wednesday on the heels of the company's filing operations results with the Securities and Exchange Commission for the fiscal year that ended on Oct. 21, 2013. As of 11:27 a.m. on Wednesday, the stock traded at a volume of 12.54 million compared to its average volume of 4.2 million shares.

The Danbury, Ct.-based company revealed its total revenue for the fiscal year ended that on Oct. 31 2013 increased by 56%, or $67.1 million to $187.7 million from $120.6 million during the same period in the last fiscal year. The total cost of revenue for the fiscal year that ended Oct. 31, 2013 increased by 56%, or $60.4 million, to $180.5 million from $120.2 million during the same period in the last fiscal year.

The fuel cell sector rose Tuesday as FuelCell and its competitors, Plug Power Inc. (PLUG) and Ballard Power Systems Inc. (BLDP), also rose. Plug Power and Ballard continued to rise in morning trading Wednesday while FuelCell dipped.

TheStreet Ratings team rates Fuel Cell Energy as a "sell" with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate FUELCELL ENERGY INC (FCEL) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Electrical Equipment industry and the overall market, FUELCELL ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for FUELCELL ENERGY INC is currently extremely low, coming in at 4.71%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -17.58% is significantly below that of the industry average.
  • Currently the debt-to-equity ratio of 1.54 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, FCEL's quick ratio is somewhat strong at 1.15, demonstrating the ability to handle short-term liquidity needs.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Electrical Equipment industry average. The net income increased by 14.4% when compared to the same quarter one year prior, going from -$11.34 million to -$9.70 million.
  • Investors have driven up the company's shares by 52.85% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the future course of this stock, we feel that the risks involved in investing in FCEL do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

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