Green hydrogen, which refers to using renewable energy to create hydrogen, is spreading fairly rapidly around the world. Green hydrogen predominantly decarbonizes carbon-heavy industries that are difficult to fully electrify, such as steel production and chemicals. The EU recently approved Germany’s 2.2 billion euro initiative to decarbonize industry with green hydrogen and electrification. In Brazil, over 60 deals related to green hydrogen have been signed. U.S. electrical products maker, ABB and Green Hydrogen International recently partnered to build a plant that will generate 280,000 tons of green hydrogen annually. Bloomberg predicts that by 2030, green hydrogen could cost less than natural gas-fueled hydrogen, even without tax credits. Here are three undervalued hydrogen stocks to buy now.
Bloom Energy (BE)
Hydrogen fuel cell maker Bloom Energy (NYSE:BE) is changing hands for a rather low price/sales ratio of 1.9 times. Analysts expect its revenue to jump 11% this year and another 24% in 2025. Those figures alone make it one of the most undervalued hydrogen stocks.
Meanwhile, CEO KR Sridhar recently noted that the U.S.’s electricity demand is expected to accelerate up to ten-fold in the coming years. However, the country’s current electric grid is unable to handle this increased demand. After in-depth talks with data centers, Bloom is poised to benefit. These centers believe that BE’s electricity-producing fuel cells are their best option when it comes to alternative power solutions.
Moreover, a number of utilities and multiple industrial firms are interested in the company’s newer products.
Linde (LIN)
Linde (NASDAQ:LIN) has a highly profitable industrial gas business. It is also building two clean hydrogen plants to boost the company’s long-term top and bottom lines.
Linde has also already obtained a large customer for the clean hydrogen plant that it’s launching in Texas. OCI agreed to buy hydrogen and nitrogen from Linde for its Texas ammonia plant.
Despite Linde’s potent combination of current profits and future, positive catalysts from clean hydrogen, LIN stock has a low enterprise value/EBITDA ratio of 19.3 times.
Meanwhile, Linde expects its earnings per share to jump 8% to 11% this year, excluding foreign exchange fluctuations.
Plug Power (PLUG)
Last year, Plug Power (NASDAQ:PLUG) lost a great deal of money on the hydrogen that it delivered to its customers. But Plug is building its own green hydrogen plants and says that it can churn out green hydrogen for $3 to $5 per kilogram. Historically, the firm has been able to sell the fuel for roughly $6 to $7 per kilogram, but it noted earlier this year that it was raising the prices that it charges for its hydrogen. Moreover, PLUG says that Washington is preparing to provide tax credits of up to $3 per kilogram for green hydrogen.
So PLUG’s gross margin for the green hydrogen that it produces could exceed $7 per kilogram in some cases and will be over $1 per kilogram at the lowest. Moreover, Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN) have committed to buying huge amounts of green hydrogen from Plug starting in 2025. Given these points, I believe that the production of green hydrogen will become a big profit generator for PLUG by the end of next year.
Additionally, in late 2025, Plug Power is likely to start getting sizable deals to provide backup and supplemental electricity to data centers.
These catalysts make Plug’s current market capitalization of $2.1 billion low, making it one of the best undervalued hydrogen stocks.
On the date of publication, Larry Ramer held a long position in PLUG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
