Plug Power Inc (NASDAQ:PLUG) shares have been highly volatile over the past few months. The stock traded at $0.55 on November 5, soared past $11 on March 10, and currently trades at $7.24. Note that the stock reached its all-time high of $1500 on March 10, 2000. Plug Power is driven by pure speculation, and has been a favorite of short sellers. The Motley Fool contributor Tyler Crowe says that Plug Power is highly expensive even if you have the most optimistic view.

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Plug Power’s revenues have declined 3.6% since 2011

Let’s put the speculative ups and downs aside to find out what long-term investors can expect from this Latham, New York-based company. To start with, Plug Power doesn’t actually manufacture fuel cells. It makes fuel cell systems by purchasing fuel cells from Ballard Power Systems Inc. (NASDAQ:BLDP) and making them compatible with systems powered by lead acid batteries. These fuel cell systems produce electricity from hydrogen through chemical reactions, and produce water as a byproduct. The company has delivered more than 4,000 units to giants like The Coca-Cola Company (NYSE:KO) and Wal-Mart Stores, Inc. (NYSE:WMT).

Plug Power Inc (NASDAQ:PLUG) is trying to get customers from other markets like ground support vehicles at airports, short-route delivery vehicles, and refrigeration units for truck trailers. Giving a valuation to Plug Power is quite difficult because the company is yet to turn profitable. In fact, it has never been profitable in its 15-year history. So, the only way we can reach a valuation is through price-to-sales ratio, which stands at 31. The stock has gained more than 340% over the past three months, but its revenue hasn’t been able to catch up. Plug Power’s revenue is down 3.6% since 2011. However, the expansion of its manufacturing unit, and the recent order for 1,700 units by Wal-Mart Stores, Inc. (NYSE:WMT) should boost sales.

The S&P 500 index has a price-to-sales ratio of 1.7. Even Plug Power Inc (NASDAQ:PLUG)’s peers’ P/S ratio is between 5 and 8. To justify such a high valuation, Plug Power needs to show strong growth in coming years. The S&P Capital IQ forecasts its revenues to jump from $26.6 million in 2013 to $65 million this year. It projects Plug Power’s revenues to grow at about 100% CAGR over the next three years. That’s an overly optimistic forecast as the company has struggled to increase revenues over the past three years. And the entire industry is expected to grow at 18.9% annual rate over the next five years.

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Where is Plug Power headed?

Going forward, the stock will either fall in line with its peers, or Plug Power Inc (NASDAQ:PLUG) will grow fast enough to make the purchase price worth it. Again, no long-term investor wants to buy a stock that either falls below the purchase price or remains at the same level for several years. They expect the stock to appreciate and yield good returns.

Crowe estimates that Plug Power Inc (NASDAQ:PLUG) will have to sustain a 25% sales growth level, and its price-to-sales ratio falls in the range of its peers over the next decade. In that case, the stock may yield a 10% to 12% return. But if the price-to-sales ratio falls in line with peers without any change in revenue (revenue over the past three years remains almost flat), then investors getting into the stock at this point may lose 75% to 85% of their money.

Plug Power Inc (NASDAQ:PLUG) shares were up 3.04% to $7.11 at 2:18 PM EDT.