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Should You Buy Into the Rise of the Fuel Cell Makers?

Stocks in this article: BLDP FCEL PLUG WMT TSLA TM HMC

NEW YORK (TheStreet) -- Fuel cell shares now are behaving like the 3-D-printing stocks of 2013. Shares of Ballard Power (BLDP), like those of its peers FuelCell Energy (FCEL) and Plug Power (PLUG), have soared. In 2014, Ballard's shares have risen by 250% to $5.28.

Ballard Power manufactures and sells fuel cells and provides engineering services for fuel cell applications. A fuel cell is an environmentally friendly electrochemical device that uses hydrogen fuel and oxygen to produce electricity. So far, Ballard Power has designed and sold 150 MW of hydrogen fuel cells.

The recent sector rally can be attributed to increasing optimism due to some new orders, as well as Plug Power's deal with Wal-Mart (WMT). More important, Ballard Power has made significant improvements in its top and bottom lines. The company's shares could continue going higher in anticipation of positive cash flows and break-even earnings in the near future.

Ballard Power's long-term outlook appears bright, as some of the leading automakers have been betting big on the future of fuel cell cars. Furthermore, Tesla (TSLA) could also provide growth opportunities with its expansion plans.

Ballard Power has been trading on the Nasdaq for decades. It used to be a fairly large organization, with a market cap of $5 billion in 2000. Back then, the company's stock soared to more than $120 because of all the excitement surrounding fuel cell vehicles, which later turned out to be false hope. Consequently, Ballard Power's shares tanked. Despite the recent rally, its market cap is less than $580 million.

In the last three years, Ballard Power's revenue has risen by 10%, which isn't a lot, but its gross profits have more than doubled. Its gross margins have risen from just 13% in 2011 to 27% in 2013.

 

2011

2012

2013

Revenue (in thousands)

$55,773

$43,690

$61,251

Gross Profit (in thousands)

$7,279

$7,369

$16,759

Net Loss (in thousands)

-$37,175

-$42,320

-$19,988

Gross Margin

13%

17%

27%

In its previous fiscal year, Ballard Power's revenue climbed 40%, while its adjusted losses shrunk 63%. Its net cash reserves also rose to $30.3 million from $12.48 million in the previous fiscal year.

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