Ballard Power (BLDP, Financial) recently released impressive results for the third quarter. Its strong results and narrowing losses indicate better times. The company has performed well on the back of strong sales for its telecom backup power fuel cell. Ballard is also undertaking various initiatives to lower its costs to improve its margins. Let us take a closer look and see how well Ballard could perform in the future.
Looking beyond the results
Ballard’s quarterly revenue rose by 21% to $20.6 million as compared to the same quarter last year. But the most impressive fact is that, on the earnings front, Ballard’s adjusted EBITDA grew more than 151%. This can be an important aspect which the investors can consider in making investment decisions. The company also lowered its losses by $0.02 per share from $0.05 per share last year.
Ballard has entered into a multi-year agreement to supply fuel cell stacks which are used in GenDrive Systems deployed in forklift trucks. Ballard signed this agreement with a well-known player in the fuel cell market Plug-Power. With this agreement, the management is confident that this long lasting partnership between the two will be a strong catalyst to the growth momentum of Ballard in the coming years.
Plug Power is already a well-known name and it also has been impressive with its results in the past. It has a strong base of customers including some giants such as Walmart (WMT, Financial), P&G (PG, Financial), Sysco (SYY, Financial), CVS Pharmacy (CVS, Financial) and others. Plug Power is already seeing significant growth with the new and the repeat orders by its clients, and it is expecting to see a threefold increase in the orders over the coming years. So with this multi-year agreement, Ballard is also likely to share benefits that Plug Power is going to enjoy.
Opportunities across markets
Ballard is seeing tremendous opportunities overseas. It is receiving orders around the globe and is in good condition to meet all of them. It has received a lucrative order from Digicel Networks in Jamaica for ElectraGen ME systems which is helping Ballard to improve its reach and it has now reached a total 25 systems operating in that region. This is not just enough for Ballard, it is also receiving many orders from other parts of the globe such as Japan, Thailand and China.
Ballard is seeing some good growth opportunities in the engineering services. It has entered in to some long term contracts with automotive giants such as Volkswagen (VOW, Financial). It also has back power assembly contract with Azure hydrogen in China and is seeing positive signs from it. In Europe also, the company has entered a non-binding MOU with Skoda Electric. Ballard is optimistic about this deal as even the government is progressing with JTI allocation.
Moving further, Fuel Cell market is going to be a billion dollar market in near future. This can be said because of extreme weather will lead to power generation and this will lead to the demand of fuel cells. Ballard is anticipating that long term prospects of this market are strong and it can help it to be a good long term holding in future.
Conclusion
Moving on the fundamentals now, the stock is still making losses that is why it is showing no trailing and forward P/E. However, the recent performance by Ballard shows that the stock has enough steam and it is recovering which can be seen the narrower loss. But in five years its earnings are disappointing with CAGR of 0.03%. The company’s efforts are no doubt commendable, but it seems like the stock will need some more time to be on track. So as of now I would like to suggest the investors to stay away from the stock until it shows some positive signs of gaining market share.
