Why Plug Power (PLUG) Is Popping

NEW YORK (TheStreet) -- Plug Power (PLUG) opened the session with double-digit percentage growth on Monday after announcing it had signed a significant contract with a leading North American retailer.

By market open, shares had added 18.2% to $3.66. A mere five weeks into the year, the stock has exploded 137.4%.

The alternative fuel cell developer said it had received a "significant GenKey contract from a leading retailer to roll out its turnkey hydrogen fuel cell system solutions."

Over a two-year period, the company will install its equipment in six North American distribution centers, the first of which will be operational in the second quarter of 2014.

The Latham, NY-based business said the partnership cements its position as the top global proton exchange membrane (PEM) fuel cell system provider. This type of fuel cell uses the electrochemical reaction of hydrogen and oxygen to convert to electrical energy. Plug Power said the deal also proved this fuel source is becoming mainstream.

"We've, without a doubt, clearly demonstrated our leadership position as the premier provider of industrial fuel cell solutions. In the coming year, we plan to grow not only in the material handling industry, but also expand into other fleet vehicle applications such as transport refrigeration units, ground support equipment and range extenders," said CEO Andy Marsh in a statement.

Currently, Plug Power has deployed more than 4,500 GenDrive units to clients such as Wal-Mart (WMT), Procter & Gamble (PG), and BMW.

Plug Power's rally is pulling others in the industry higher in morning trading. Ballard Power Systems (BLDP) has gained 7.3% to $2.20, while FuelCell Energy  (FCEL) has climbed 2.1% to $1.45.

Must Read: Plug Power Receives Multi-Site GenKey Order

TheStreet Ratings team rates PLUG POWER INC as a Sell with a ratings score of D-. The team has this to say about their recommendation:

"We rate PLUG POWER INC (PLUG) 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 deteriorating net income and disappointing return on equity."

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

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Electrical Equipment industry. The net income has significantly decreased by 54.0% when compared to the same quarter one year ago, falling from -$10.33 million to -$15.90 million.
  • 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, PLUG POWER INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • PLUG, with its decline in revenue, underperformed when compared the industry average of 7.4%. Since the same quarter one year prior, revenues slightly dropped by 3.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • PLUG's debt-to-equity ratio of 0.85 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.21 is sturdy.
  • This stock has increased by 754.83% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in PLUG 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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