Shares of Fuel Cell Energy (FCEL) stock are losing major ground on Tuesday morning after a miserable second-quarter earnings report.
FCEL stock was already down 21% in 2015, 46% for the year and 49% in the last five years — BEFORE this morning’s 8% freefall. It can’t catch a break — and it’s beginning to look doubtful the company ever will.
Listen, I think alternative energy is great, and I’m all for reducing our carbon footprint. But if there’s not a fundamentally sound business behind it, investing in such a business just doesn’t make sense.
Unfortunately, Fuel Cell Energy continues to be a sub-par business, and FCEL stock a sub-par investment.
Just take a look at its most recent quarter:
FCEL Second-Quarter Whiff
Second-quarter FCEL earnings per share actually clocked in at a 4-cent loss, twice as bad as the 2-cent loss analysts expected. Just as bad was FCEL revenue last quarter, which clocked in at $28.6 million, or only 69% of Wall Street’s consensus $41.3 million estimate.
The field of fuel cell technology is an admirable form of ultra-clean energy that we should no doubt be researching as a society, but the economics aren’t attractive enough for it to be investable quite yet. Both FCEL and two of its publicly traded peers, Ballard Power Systems (BLDP) and Plug Power (PLUG), have failed to turn a profit in each of the past five years.
The fact that FCEL lost $10.7 million on less than $30 million in revenue shows that this business still isn’t commercially viable.
Backlog and Cash
Fuel Cell Energy specializes in making, operating and servicing industrial fuel cell power plants, and it does indeed have a large backlog, at least compared to its revenues. FCEL’s backlog — the value of built-up work that Fuel Cell Energy hasn’t yet been able to get to — is $312.2 million, or nearly 1.7 times 2014 revenues.
Although a high backlog can give investors some reassurance there will be revenues down the line, one also generally don’t want to see such high amounts of unfinished work, as it can damage a company’s reputation, cause customers to flee and generally just constrains how quickly the company can grow.
If there’s a silver lining here, it’s barely visible: Fuel Cell ended the second quarter with $110.3 million in cash and cash equivalents. With 294 million shares outstanding, that makes for cash reserves of 37 cents per share of FCEL stock. With shares trading just above $1 a pop right now, that means there’s only another 60 or 70 cents this thing can lose before it’s trading for what it’s got in its bank account.
If you don’t think that’s much to brag about, well … you’re right. FCEL stock is still a lousy investment, and unless something changes rather quickly, this stock will be resigned to purgatory for years to come.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
