Ballard Power Systems Inc. (TSX: BLDP)(NASDAQ: BLDP) shares have risen over 40% in the last six months. Here’s why I think Ballard shares will continue to outperform.
Over the years, a lot has been written about Ballard Power Systems — some of it good; some of it bad.
But at the end of the day, the fact remains that the company has recently been making solid strategic and financial progress. And the company’s better-than-expected second-quarter results that were reported in early August clearly demonstrate why we can expect this to continue.
While the company is still reporting net losses, these losses are improving significantly. Earnings per share for the quarter were -$0.01 compared to -$0.04 in the same period last year — an 81% year-over-year improvement. This was driven by a 50% increase in revenue to $26.5 million and a six-basis-point improvement in the gross margin to 35%.
In fact, gross margins have been improving dramatically, as the company has been working costs down, benefiting from scale and volume and increasing revenue from its higher-margin businesses. In 2015, the gross margin was 18%; in 2016 it was 28%; and in the last two quarters of the year, it was just above 30%.
Importantly, the company’s balance sheet remains in good shape, ensuring that it has the flexibility and ability to respond to market conditions. Ballard still has no debt on its balance sheet and as of the end of the second quarter of 2017, and it still had $68 million in cash.
Early in July, the company announced continued progress in China, where it received a $29 million order from Chinese company Broad-Ocean for 600 fuel cells which will be used in clean-energy buses and trucks in key Chinese cities. A large portion of these will see deployment in the second half of this year.
Further to this, Broad-Ocean has announced upcoming investment in a production facility that will have the capacity for assembly of up to 17,000 engines annually.
In cities like Beijing and Vancouver, Ballard has been involved in partnerships and joint ventures and is seeing its FCveloCity engines increasingly being used to power buses.
So, in summary, the fuel cell market continues to build momentum, as clean air becomes an increasingly important goal for countries across the world. From China to Europe to California, governments are showing more and more interest and activity in fuel cell vehicles.
The fuel cell is quickly gaining traction around the world, and Ballard is increasingly well positioned to benefit from this.
