Why FuelCell Energy (FCEL) Is Down Today

NEW YORK (TheStreet) -- FuelCell Energy  (FCEL) plunged on Friday after peer company Plug Power  (PLUG) slid thanks to a pair of analyst downgrades.

Roth Capital downgraded Plug Power to "neutral" from "buy" despite raising the target price to $8 from 80 cents. The firm said the company's fourth quarter results, which it announced Thursday morning, indicate the momentum of its bookings is slowing. The firm contends that Plug Power's bookings could still grow at a historic rate, but a large portion of that growth may already have been reflected in the stock. The firm also cautions that some of Plug Power's shipments could be delayed because many of its products will be sent to customers that must still add hydrogen infrastructure, which could take longer than expected.

Cowen, meanwhile, downgraded the stock to "market perform" from "outperform." The firm noted the company's sales should increase this year thanks to strong bookings and gross margins should increase as volumes increase and some costs decrease. But Cowen believes the stock's valuation looked full before trading Friday.

FuelCell fell 10.81% to $2.98 at 3:24 p.m. on Friday.

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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, weak operating cash flow 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 6.62%. 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.
  • Net operating cash flow has decreased to -$18.77 million or 39.94% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The debt-to-equity ratio of 1.37 is relatively high when compared with the industry average, suggesting a need for better debt level management. 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 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.
  • You can view the full analysis from the report here: FCEL Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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