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Why FuelCell (FCEL) Is Down Today

NEW YORK (TheStreet) -- FuelCell Energy (FCEL) fell 17.1% to $1.36 Friday after the company announced the price of a new public offering.

The utility company's new public offering prices 22 million shares of common stock at $1.25 each. That price is well below FuelCell's Thursday closing price of $1.64. The price is about in the middle of the company's 52-week range of 84 cents to $1.95.

Gross proceeds from the offering should come to about $27.5 million and net the company $26 million after fees and commissions.

TheStreet Ratings team rates FUELCELL ENERGY INC 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 multiple 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 40.51% 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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