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What is the real value of FuelCell Energy?

December 19, 2024  By Rifka Kats
Macroaxis Story
FuelCell Energy, a player in the Industrials sector, presents a complex picture for investors seeking value. With a total revenue of $123.4 million against a cost of revenue of $133.9 million, the company is operating at a loss, reflected in its negative profit margin of 1.35. The stock's price-to-book ratio of 0.32X suggests it is trading below its book value, which might catch the eye of value investors. However, the substantial net income loss of $108.1 million and a return on equity of negative 0.19 indicate significant challenges in profitability. Despite an enterprise value of $155.9 million, the company's high debt level of $139.25 million could be a concern. While the short ratio of 2.20X implies some level of short interest, the working capital of $410.41 million provides a cushion. Investors should weigh these factors carefully, considering both the potential for turnaround and the risks involved. Many baby boomers might not be fully aware of the potential in the electrical equipment sector, so let's take a closer look at FuelCell Energy. We'll explore whether adding FuelCell Energy to your portfolio could be a smart move. Is the company's valuation justified? I'll provide insights into FuelCell's valuation to help you decide if this stock deserves a spot in your investment strategy.
Published 12 hours ago
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Reviewed by Michael Smolkin

FuelCell Energy's valuation presents a mixed bag for investors, with a Price to Book ratio of 0.3178 suggesting the stock is trading well below its book value, potentially indicating an undervalued opportunity. However, the company's significant loss of 108.1M in net income raises concerns about its profitability and long-term viability, urging investors to weigh the risks carefully before making a move.

Main Points

FuelCell Energy has liabilities totaling $139.25 million and a Debt to Equity (D/E) ratio of 0.13. This low ratio might indicate that the company isn't leveraging borrowing as much as it could. The asset utilization ratio, which measures revenue generated per dollar of assets, stands at 12.91%. This means FuelCell Energy earns $0.13 for every dollar of assets. A rising asset utilization ratio indicates improved efficiency in using assets for daily operations.
We determine the current worth of FuelCell Energy using both absolute as well as relative valuation methodologies to arrive at its intrinsic value. In general, an absolute valuation paradigm, as applied to this company, attempts to find the value of FuelCell Energy based exclusively on its fundamental and basic technical indicators. By analyzing FuelCell Energy's financials, quarterly and monthly indicators, and related drivers such as dividends, operating cash flow, and various types of growth rates, we attempt to find the most accurate representation of FuelCell Energy's intrinsic value. In some cases, mostly for established, large-cap companies, we also incorporate more traditional valuation methods such as dividend discount, discounted cash flow, or asset-based models. As compared to an absolute model, our relative valuation model uses a comparative analysis of FuelCell Energy. We calculate exposure to FuelCell Energy's market risk, different technical and fundamental indicators, relevant financial multiples and ratios, and then comparing them to FuelCell Energy's related companies.

FuelCell Energy Investment Alerts

FuelCell investment alerts and warnings help investors to get more proficient at understanding not only critical technical and fundamental signals but also the significant portfolio-centered indicators. These indicators include beta, alpha, and other risk-related measures that will help you in monitoring FuelCell Energy performance across your portfolios.Please check all investment alerts for FuelCell

FuelCell Energy Valuation Ratios as Compared to Competition

Our valuation model uses many indicators to compare FuelCell value to that of its competitors to determine the firm's financial worth. You can analyze the relationship between different fundamental ratios across FuelCell Energy competition to find correlations between indicators driving the intrinsic value of FuelCell.

FuelCell Energy Gross Profit

FuelCell Energy Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing FuelCell Energy previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show FuelCell Energy Gross Profit growth over the last 10 years. Please check FuelCell Energy's gross profit and other fundamental indicators for more details.

What is driving FuelCell Energy Investor Appetite?

The small slide in market price for the last few months could raise concerns from institutional investors as the firm is trading at a share price of 9.67 on very low momentum in volume. The company executives did not add much value to FuelCell Energy investors in November. However, diversifying your holdings with FuelCell Energy or similar stocks can still protect your portfolio during high-volatility market scenarios. The stock standard deviation of daily returns for 90 days investing horizon is currently 8.18. The very high volatility is mostly attributed to the latest market swings and not very good earnings reports from some of the FuelCell Energy partners.

Margins Breakdown

FuelCell profit margins show the degree to which it makes money. Margin indicators are used not only by investors but also by creditors or FuelCell Energy itself as indicators of financial health and management effectiveness.
Please look more closely at the different varieties of FuelCell Energy profit margins.
Pretax Profit Margin(1.05)
Operating Profit Margin(1.33)
Net Profit Margin(1.05)
Gross Profit Margin(0.1)
FuelCell Energy Market Cap is quite stable at the moment. FuelCell Energy Market Cap is quite stable at the moment. "Value is what you get," goes the saying, and for savvy investors eyeing FuelCell Energy, understanding its value proposition is crucial. With a current ratio of 7.20X, the company demonstrates a robust ability to meet its short-term obligations, which might appeal to those concerned with liquidity. However, the challenges are evident with an operating margin of 1.42, reflecting significant losses in operational efficiency. Despite a market capitalization of $200.09 million, the company's price-to-book ratio of 0.32X suggests it is trading below its book value, potentially signaling an undervaluation. Investors should weigh these factors carefully, considering the 76.53% probability of bankruptcy, before making any investment decisions..

Is FuelCell Energy latest slide permanent?

FuelCell Energy's recent increase in volatility to 68.48 has caught the attention of investors, raising questions about the persistence of its current downtrend. While such volatility can be short-lived, it's crucial to examine the factors driving FuelCell Energy's recent performance. Investors should assess whether the company's fundamentals, market conditions, or industry trends suggest a more enduring change. Although it's premature to declare this decline permanent, keeping an eye on upcoming earnings and strategic moves is advisable, as these could significantly impact the stock's direction. The heightened volatility seen in bear markets can affect FuelCell Energy's stock price, causing concern among investors. This often leads to portfolio adjustments, as investors seek to mitigate risk by diversifying their holdings during price declines.

Our Conclusion on FuelCell Energy

When is the right time to buy or sell FuelCell Energy? Buying stocks such as FuelCell Energy isn't very hard. However, what challenging for most investors is doing it at the right time. Proper market timing is something most people cannot do without sophisticated tools, which help to isolate the right opportunities, deliver winning trades and diversify portfolios on a daily basis.
To conclude, as of the 19th of December 2024, our analysis shows that FuelCell Energy moves totally opposite to the market. The company is overvalued and projects above average odds of financial distress for the next 2 years. Our primary 90 days advice on the company is Strong Sell.

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Editorial Staff

Rifka Kats is a Member of Macroaxis Editorial Board. Rifka writes about retail product and service companies from the perspective of a regular consumer and sophisticated investor at the same time. She is passionate about corporate ethics and equality in the workforce. View Profile
This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Rifka Kats do not own shares of FuelCell Energy. Please refer to our Terms of Use for any information regarding our disclosure principles.

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