Raglan Glencore Nickel Mine, © Hydrogenics
Canadian-based Hydrogenics (NASDAQ: HYGS) reported revenue of USD 8.7 million for the fourth quarter of last year and a net loss of USD 0.20 per share. This means revenue in all of 2016 was at USD 29 million, at a net loss of USD 9.9 million. Conversely, the number of order bookings has skyrocketed and backlog totaled USD 106.6 million, of which around USD 38 million are said to be recognized as revenue in the current fiscal year – at a steadily increasing profit margin of above 20 percent.
These figures need to be seen in conjunction with expectations for Hydrogenics to become a future technological force to be reckoned with, as several projects promise very high growth rates, some of them in China and Europe (introduction of hydrogen-powered trains in collaboration with Alstom) and, consequently, the jump to profitability. I evaluate the company mainly based on the technologies it has to offer (electrolyzers, H2 filling stations, fuel cell components for trucks, rolling stock, buses) and its know-how and rate Hydrogenics in the expectation that sooner or later, it will be bought up by some other company because of its technical expertise (intellectual property). Hydrogenics operates on the fuel cell markets that promise the highest growth rates in the industry and should be viewed as a small cap value on the stock exchange. That China is a driving force in this field is also felt at Hydrogenics, as the company has already garnered bookings for retrofitting about 2,000 vehicles (trucks and buses). Additionally, the first power-to-gas plant based on renewable energy has been inaugurated in California. Hydrogenics should be viewed as a “technology player” and a target for acquisition.
Risk warning
Investors must understand that buying and selling shares is done at their own risk. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small and mid-cap ones, i.e., they do not represent stakes in big companies and the volatility is significantly higher. This article is not to be taken as a recommendation of what shares to buy or sell – it comes without any explicit or implicit guarantee or warranty. All information is based on publicly available sources and the assessments put forth in this article represent exclusively the author’s own opinion. This article focuses on mid-term and long-term perspectives and not short-term profit. The author may own shares in any of the companies mentioned in this article.
Author: Sven Jösting (text was written in March 2017)
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