Why Investors Should Pay Attention to Ballard Power

Forget what you think you know about this former high flyer.

Karen Thomas, MSc, CFA

Author Bio

Karen Thomas began her investment career in 1998 and spent more than a decade working as an equity analyst and portfolio manager at investment management firms, including a major mutual fund company and a major pension plan. After gaining extensive experience in the investment industry, she decided that individual investors deserved access to the same knowledge and insights to help them take greater control of their financial futures. After the birth of her second daughter, Karen left her investment management career to write for The Motley Fool, where she has been helping investors make sense of stocks and the stock market for more than 10 years. Her work focuses on identifying undervalued opportunities and helping investors take a long-term approach to building wealth. Outside of investing, Karen enjoys spending time with her family and staying active outdoors.

Education

Master of Science (MSc) in Finance
Bachelor of Commerce, major in Finance and minor in International Business
Chartered Financial Analyst (CFA) designation, earned in 2000

Areas of Expertise

Energy stocks, long-term investing, value investing, and contrarian investing.

Social Media Profiles

Favorite Investment Quote

"Be fearful when others are greedy, and greedy when others are fearful." — Warren Buffett

Published January 7, 2014 1:22 pm EST

In the last 5 days, Ballard Power’s (TSX: BLD, NASDAQ: BLDP) stock price has increased over 30%, on much higher volumes to boot. The average volume in the last 3 months is just over 200,000 yet on January 3^rd, the stock was up on volume of over 1.2 million shares. Back in the early 2000’s Ballard’s stock hit a high of $150 per share. Unbelievable considering the losses that the company was seeing and the early stage of the fuel cell market and technology. 13 years later though, trading at just over $2.00(!) per share, the stock is starting to look interesting ….

Fuel Cells Gaining Traction

The move in Ballard’s shares seems, at least in part, to be related to activity in the fuel cell industry. Plug Power (NASDAQ: PLUG) recently announced fourth quarter orders that were above expectations, and announced contracts from big name customers, such as Walmart and FedEx. The company is struggling financially, but the news of increasing demand bodes well for the industry as a whole.

Ballard Moving Closer to Profitability

But that’s not the whole story. In fact, Ballard has been making quiet progress in its attempt to turn the company into an actual money making business. For the first nine months of 2013, Ballard reported revenue of $43.9 million, an increase of 65% compared to the previous year. Furthermore, the company saw a big improvement in gross margin. Gross margin for the first nine months of 2013 was 25%, compared to 17% in 2012 and 13% in 2011.

According to the company, EBITDA will break-even at a quarterly revenue rate of approximately $20 million. In the third quarter, revenue was $17 million.

Full year 2013 Guidance

Management has given a very optimistic outlook and guidance. For 2013, they expect revenue growth of over 30% and an improvement in adjusted EBITDA of over 50%. Based on results so far this year, this outlook is totally achievable.

Are Current Cash Reserves Enough?

Currently, Ballard has $20 million of cash on the balance sheet. The company issued 9 million shares back in October in order to raise US $12.6 million to continue to fund ongoing operations. While there is no guarantee that the company will not need to come to the market again, recent results have been encouraging.

Bottom Line

Ballard Power seems to be approaching the finish line with respect to figuring out how to make a business out of their fuel cell technology. While we could say that during the early 2000’s there was blind optimism for the company and its technology, it seems that at this point, the market has been slow to get excited about some real signs that things are looking up. Understandable, since many investors got burned as the stock got beaten down from its highs of $150 to single digit territory. I think it’s time to revisit this name.