FuelCell Energy Inc (NASDAQ:FCEL), a electrical company based in United States, saw a decent share price growth in the teens level on the NasdaqGM over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at FuelCell Energy’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for FuelCell Energy
Is FuelCell Energy still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that FuelCell Energy’s ratio of 1.39x is trading slightly below its industry peers’ ratio of 1.6x, which means if you buy FuelCell Energy today, you’d be paying a relatively fair price for it. And if you believe that FuelCell Energy should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that FuelCell Energy’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from FuelCell Energy?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 34.24% over the next couple of years, the future seems bright for FuelCell Energy. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in FCEL’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at FCEL? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on FCEL, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for FCEL, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on FuelCell Energy. You can find everything you need to know about FuelCell Energy in the latest infographic research report. If you are no longer interested in FuelCell Energy, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.