Plug Power Inc (NASDAQ:PLUG) shares have had an eventful year so far. A string of good news drove the share price to rise as much as 200% since the beginning of the year. There are some investors and analysts, however, who are skeptical about the growth of the shares because they have risen significantly in such a short span.
In February, Plug Power Inc (NASDAQ:PLUG) entered into a contract with Wal-Mart to supply 1,738 GenDrive fuel cell units along with infrastructure and fueling services for six Wal-Mart centers. The company has been a supplier to the retailer since 2007, but this particular deal is seen as a game changer as the contract is around $50 million, which is the largest order received by the company from any single customer, says a report from Seeking Alpha.
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During the fourth quarter earnings call, CEO Andy Marsh stated that the company has also received an order from a major automobile company. The news acted as a catalyst to the bullish sentiments among the investors as they saw the company’s fuel cell system as gaining popularity.
Weak fundamentals for Plug Power
Short interest in the shares has surged from 7 million to 30 million at present. The short sellers are convinced that Plug Power had a good run so far and the market is making a big deal out of company’s recent announcements.
The cash flow statement of Plug Power Inc (NASDAQ:PLUG) has excessive low points and even though there is excessive cash reported of $5 million, the profit margin of negative 172% shows the minimal importance that this cash balance has.
Compared to its competitors Plug Power Inc (NASDAQ:PLUG) does not have as much money to put into business operations. It is in bottom 3% of its industry, when compared on the basis of operating margin. Likewise, return on assets, return on invested capital and return on equity are triple digit lows. Return on equity is at negative 335%, which puts the company in the bottom 5% of the industry, says a report from the WallStreetDaily.
However, on a year over year basis Plug Power Inc (NASDAQ:PLUG) has posted a surge in revenue, earnings and cash flow, which must not be ignored. Though the company has an impressive growth potential, the fact that it is driven by news makes it highly volatile at least for now.