Pure play fuel cell companies have had a hard time since early 2000, when it was widely believed fuel cell technologies were inevitably going to rendera the combustion engine useless and solve global warming problems. These companies include Ballard Power (BLDP), Fuel Cell Energy (FCEL), Hydrogenics (HYGS), and Plug Power (PLUG). Today most of these companies have little of their former share value remaining.
United Technologies (UTX) is more diversified company and has been a safer way to profit from a move to fuel cells.
If you are willing to take on additional risk in a pure play fuel cell company, it is important to look at cash, debt, and timeframe to profitability. Ballard Power is worth a look if your investment portfolio includes speculation.
Ballard Power has had their sights on breakeven earnings before interest, taxes, depreciation and amortization (EBITDA) for some time now. As of Q3 2011, Ballard was on track to accomplish this feat in fiscal year 2012. Year to date revenues have increased 25% to 55 million and the company expects continued improvement moving forward. Net cash reserves were 37.1 million as of Q3 and are expected to increase 5 to 10 million dollars in Q4.
Product mix is important for gross margins, and Ballard’s improved to 18% in 2011. This increase, year after year, is important for the EBITDA goal. Product mix is a large part of Ballard’s progress and bus fuel cells have the highest margins.
While the stock has been sinking toward its low, investors should not ignore the bullish bus announcements released from the company. December has been particularly interesting with the December 14 announcement of a supply agreement for 21 of the company's latest-generation FCvelocityTM-HD6 fuel cell power modules. This announcement was followed by the December 27 Letter of Intent for 25 FCvelocityTM-HD6 fuel cell modules to power 25 busses in Sao Paulo, Brazil. This latest order, similar to the Vancouver Olympic transit, offers another world stage to showcase Ballard power in the 2014 World Cup which will be hosted in Brazil. While these announcements were expected to some extent, the later news is beyond expectations of a 15 module order mentioned during the November 2 conference call, taking Ballard closer to their EBITDA goal.
Disclosure: I am long BLDP.