Momentum Is Building for Ballard Power Systems Inc.

Investors can expect a growing order book and fuel cell improvements to result in a good year for Ballard Power Systems Inc. (TSX:BLD)(NASDAQ:BLDP).

| More on:
The Motley Fool

With all of the false starts that Ballard Power Systems Inc. (TSX:BLD)(NASDAQ:BLDP) has had over the years, I understand how investors can be pretty skeptical about the possibility of it actually making money off of its revolutionary fuel cell technology. There are two reasons, however, why I believe investors can be optimistic about the future of this company and this stock.

Firstly, there are real, concrete things that have happened and are expected to happen that point to success in the coming years, some of which will be discussed later on in this article. Secondly, if investors remember that this stock is prone to big time volatility, and if they therefore remain disciplined about when they get into the stock, in my view, a lot of money can be made.

For example, the stock shot up to over $6 in early 2014, and investors were rushing to get into a stock that had increased over 900% in just over a year while still struggling to turn a profit. But in hindsight we know that this was the time to take profits and stay on the sidelines. Fast forward to today, and we see that investors are very skeptical again. I believe this is exactly the time to look seriously at the company.

Here are just three of the reasons why Ballard is on the cusp of very strong performance.

Increased fuel cell performance and lower costs

Over the last 10 years, fuel cell performance has improved dramatically in tandem with costs coming down. For example, buses in London that are powered by Ballard’s fuel cell engines have exceeded expectations thus far, and one of the buses on the fleet recently achieved 20,000 hours in operation, which is considered a significant milestone.

And as an illustration of the cost improvements, the newest generation of fuel cell engines for buses currently cost over 30% less than the previous generation and 60% less than the fuel cell engines of six years ago.

Demand is building

As of the end of 2015, the order book for 2016 was $58 million. Much of that is for fuel cell engines, but some of it is also for Ballard’s other segments, such as its Technology Solutions segment. This is already greater than last year’s revenue of $56.6 million and, according to management, is double last year’s order book.

Furthermore, this number has upside because of the fact that it only includes the first quarter for the Material Handling segment and that Ballard’s sales pipeline is the strongest it’s ever been in the company’s history.

Balance sheet is strong

Lastly, the balance sheet is strong with $40 million in cash and little debt, thereby giving the company the financial ability and flexibility to finally take its business to the next level; that is, profitability.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Karen Thomas owns shares of Ballard Power Systems Inc.

More on Investing

money cash dividends
Dividend Stocks

2 TSX Dividend Stocks Paying Big Income in a Bearish Market

Despite a pullback in the market, there are still plenty of dividend stocks paying big income to buy. Here’s a…

Read more »

Paper airplanes flying on blue sky with form of growing graph
Investing

Here’s Why Smart Investors Are Buying Bombardier Stock Hand Over Fist

Bombardier stock jumped 16% in a week amid a bearish market. What caused investors to buy this stock hand over…

Read more »

data analyze research
Investing

My 3 Top TSX Portfolio Holdings Going Into April 2023

Are you looking for TSX stocks to add to your portfolio in April 2023? Here are my three top holdings!

Read more »

consider the options
Dividend Stocks

Better Buy for Dividends – Enbridge or BCE Stock?

Given the favourable market conditions, higher dividend yield, and cheaper valuation, I am more bullish on Enbridge.

Read more »

Dividend Stocks

3 of the Best Canadian REITs to Buy While They’re Still Undervalued

These three Canadian REITs have attractive growth potential and are trading undervalued, making them some of the best to buy…

Read more »

Investor wonders if it's safe to buy stocks now
Bank Stocks

Better Bank Buy: Bank of Montreal or Bank of Nova Scotia?

Bank of Montreal and Bank of Nova Scotia trade near 12-month lows. Are these bank stocks oversold?

Read more »

Target. Stand out from the crowd
Investing

3 TSX Stocks to Buy in the Current Market Dip

The market dip from the U.S. banking crisis has created an opportunity to buy three fundamentally strong stocks before they…

Read more »

stock market
Metals and Mining Stocks

2 TSX Mining Stocks to Buy as Gold Prices Surge Past $2,000

Bullish on gold? Investing in quality mining and royalty stocks such as Barrick Gold is a solid bet in 2023.

Read more »