Investing in the "next big thing" early and riding the wave to stardom is every investor's goal. However, hindsight is always 20/20 and investors in early tech startups would have had to process a lot of market and corporate events in order to become major millionaires. Unfortunately, this is easier said than done and finding the next big thing is extremely challenging. In fact, most people who attempt this form of investing do not end up making it, and in some cases, lose their investment. However, that is the aggressive form of emerging growth and certainly this "high risk, high reward" form of investing is not for everyone. While some argue that 3D printing or fuel cells are the next big things, it still remains to be seen. But for sake of argument, lets take a look at Hydrogenics Corporation (NASDAQ: HYGS), a fuel cell company.
Turning to the fundamentals, Hydrogenics has a market cap of $213.51 million and is currently rated a "Buy" by analysts. The company currently does not have a price to earnings ratio, however forward price to earnings comes in at 152.36. Price to sales is at 5.6, price to book is a whopping 49.6, and price to cash is 22.96. Total debt to equity stands at 1.03 and cash per share is .93, giving the company a current ratio of 1.20. Earnings are expected to rise 40.2 percent this year, 128 percent next year, and 25 percent over the next five years. Sales quarter-over-quarter have fallen 34.7 percent and earnings per share has fallen 173 percent quarter-over-quarter. Despite the horrid earnings report misses, Hydrogenics has performed very well: up 51.71 percent in the past year, and up 11.38 percent year-to-date. Most of these gains could be thanks, in part, to the major fuel cell rally that took place for several months before correcting in March.
Overall, it appears Hydrogenics is the epitome of what a growth stock looks like with its overvalued valuation ratios, but that is made up for in high earning's growth forecasts. Obviously, when a company is growing hand over fist, there is not going to be a lot of opportunities to buy it "on sale". However, I will say that the company's book to share ratio of .43 is not good at all and this is certainly a cause for concern, in my opinion. Investors are reminded that fuel cell technology is still a new, emerging idea that has had little widespread trials to determine the longevity or potential success. Many fuel cell companies are either not profitable or are just finally reaching that point, which will be an issue once the market corrects.
Be sure to do your own research.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.