Can FuelCell (FCEL) Regain Tuesday's Losses?

Tickers in this article: FCEL

NEW YORK (TheStreet) -- After losing a quarter of share value over Tuesday's session, FuelCell  is eking out gains in premarket trading, up 3.6% to $1.46 ahead of the bell. A near-25% discount on for this Danbury, Conn.-based business could have investors seeing the value in this small-cap over the trading day.

The alternative fuel developer lost value after posting fourth-quarter earnings below estimates on Monday. The company reported a net loss of 6 cents a share, missing Thomson Reuters estimates by 3 cents. Revenue of $55.2 million was 56% higher than the year-ago quarter, beating expectations of $44.8 million.

TheStreet Ratings team rates FuelCell Energy INC as a Sell with a ratings score of D-. The team has this to say about their recommendation:

"We rate FuelCell Energy INC (FCEL) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Electrical Equipment industry and the overall market, FUELCELL ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for FUELCELL ENERGY INC is currently extremely low, coming in at 10.25%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, FCEL's net profit margin of -10.44% significantly underperformed when compared to the industry average.
  • The debt-to-equity ratio of 1.33 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, FCEL's quick ratio is somewhat strong at 1.24, demonstrating the ability to handle short-term liquidity needs.
  • Net operating cash flow has slightly increased to -$14.00 million or 7.66% when compared to the same quarter last year. Despite an increase in cash flow, FUELCELL ENERGY INC's cash flow growth rate is still lower than the industry average growth rate of 19.64%.
  • This stock has increased by 91.11% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in FCEL do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
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