Plug Power Inc (NASDAQ:PLUG) has received a lot of investor interest and press in the past few months. The stock has rallied mainly due to the hype surrounding its deals with Wal-Mart Stores, Inc. (NYSE:WMT) and FedEx Corporation (NYSE:FDX). Amid all these speculations, the fuel cell company claims to become profitable by the end of this year.

Plug Power

Analyzing Plug Power with the help of fundamental techniques

John Jagerson and Wade Hansen of SlingShot Trader believe, from a technical perspective, that Plug Power is in a strong downtrend. Technical analysis of stock that have never made any profit is a bit less reliable. So, Jagerson and Hansen used some fundamental techniques to analyze Plug Power..

Fundamental analysis can help analyze efficiency. So, they looked at three things: Days of Inventory on Hand, Days of Sales Outstanding and Days of Payables Outstanding. The Days of Inventory on Hand tells us how many days of sales the company can support in case there is no new production. If a company’s inventory is rising, it’s mostly because the company isn’t selling its products as quickly as it expected. The table below shows that Plug Power’s inventory stockpile has risen since 2012.

Plug Power

The time it takes to collect from customers tells about the financial health of a company’s customers, and it’s also good from the cash management perspective.The Days of Sales Outstanding shows how long it takes for a company to collect from its customers. The table below shows that Plug Power’s Days of Sales Outstanding is heading back to the 2010 levels.

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Plug Power’s efficiency worsening

Next comes the Days of Payables Outstanding shows how long Plug Power takes, on average, to pay its bills. Paying vendors is a matter of balance between keeping the company’s cash as long as possible without hurting the relationship with suppliers. If you are a profitable business with a solid financial position, your suppliers can afford to wait for a bit longer payment cycle. But if the company is like Plug Power, suppliers aren’t excited about waiting long for payments. The table below shows that Plug Power’s Days of Payables Outstanding is heading back to the 2011 levels.

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The fundamental analysis clearly tells that Plug Power’s efficiency is worsening instead of improving. It affects the company’s operations, and raises questions over its ability to turn profits in the near term.

Plug Power shares fell 0.23% to $4.32 in pre-market trading Thursday.