Plug Power Inc: A Quick Look Under The Hood

Since its March 2020 low, Plug Power has risen around 1000%. That amount of movement is profound and places new investors on the outside wondering, where is it going from here?

This will typically leave the optimists with rose-colored glasses chomping at the bit to enter the fray. They’ve likely been reading about hydrogen fuel cell technology and are really excited about the prospects. However, these types of trends typically end very ugly for latecomers as the greater fool theory plays out in real-time.

As you begin to evaluate PLUG at its price point, there are three major considerations to make:

  1. Profitability
  2. Growth
  3. Sustainability of price trend

As you consider these three areas, you should have a good perspective on the potential risk/reward.

PLUG Profitability

In the trailing twelve months (TTM) PLUG brought in $307.54 million in revenue and lost $103.82 million in net income. The first takeaway is the fact the company is not generating a profit. While it’s an important consideration, many companies that aren’t turning a profit are generating positive operating cash flow and may have significant revenue growth expectations.

The current operating cash flow for PLUG is a loss of $156.6 million. That is substantial and the trend has worsened in the last year after improving slightly from 2017 to 2019. This is a major cause of concern for the viability of a company. The lack of operating cash flow is an indication of an unproven business model.

Plug Growth

It’s possible that the cash flow and profitability situation can improve with an increase in revenue. Current 2020 analyst expectations are for a 36.9% increase in revenue and a 35.8% increase in revenue in 2021. Looking at this should provide some degree of optimism. However, as you look at its three-year revenue growth of 28.4%, you realize that the company has yet to realize any economies of scale.

This reality is reflected in the projected $0.31 per share loss for 2020 and $0.25 loss for 2021. This acknowledgment should lead you to want to look at the company’s margins.

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William K. 1 month ago Member's comment

Hydrogen fuel cells always are going to be a great future power source. That has been true for fifty years or more. A lot like cold fusion in that respect. What usually boosts a companies stock is not the great technical discovery, it is the oratory skills of the CEO. There is a definite market for the products but not everybody needs them They could work well on cars, and refueling could be much faster than recharging, and there is no need for the huge investment in power distribution.

Mark Walla 1 month ago Member's comment

60,000 per year, for starters, new fuel cell stacks from the GIGAFACTORY!!! Aka 50% more than the 40,000 in the field today!!! Aka HUGE RAMP!!!

Gigafactory to drive down CGS by 50%!!! Aka Cost of Goods Sold!!!