Ballard Power Systems Inc (NASDAQ: BLDP) engages in the design, development, manufacture, sale, and service of fuel cell products for a variety of applications. It focuses on power product markets of heavy duty motive, portable power, material handling, and backup power, as well as the delivery of technology solutions. The company was founded in 1979 and is headquartered in Burnaby, Canada.
Ballard Power Systems Inc's stock is trading at $11.58, as of 25 Mar 2022, and is down by 8% year-to-date (YTD). Over the past 12 months, the stock is down by 49%, whilst the S&P 500 is up by 15%, meaning the stock has underperformed the broader market by approximately 64% over this period.
Is Ballard Power Systems Inc a long-term investment opportunity? Let’s take a closer look and see what the numbers tell us.
Why fundamentals matter
Analyzing a company’s fundamentals gives us key insights into whether or not it will be a good 'buy and hold' investment.
By 'fundamentals', we mean a set of key metrics which include price to book value (P/BV), price to sales ratio (P/S ratio), earnings per share (EPS) and debt. When looked at together, fundamentals can tell us whether or not a company is likely to be a good investment, and for as long as investors have been buying stocks, they have relied on fundamental analysis to assess the financial health of an organization as well as its growth prospects.
What do Ballard Power Systems Inc’s fundamentals tell us about the investment opportunity? Let's have a look.
BLDP stock: the fundamentals
First, let's look at Ballard Power Systems Inc's EPS. This metric is important to help us understand how profitable the company is on a 'per share' basis, and it is calculated as net income (after dividends on preferred stock) divided by the number of outstanding shares. So if a company has $1 million in profit and 1 million shares of outstanding stock, it will have an EPS of 1.
Ballard Power Systems Inc's EPS is -0.4 based on figures from its last reported balance sheet, and this fell by 87% year-on-year, which is somewhat underwhelming.
Next, let's look at the P/S ratio, which looks at a company's stock price compared to its sales (revenues). It is calculated as the current price divided by sales for the previous 12 months, and is useful because it helps us understand how much investors are willing to pay for every dollar of a company's revenues. The consensus opinion is that stocks with a lower P/S ratio offer better value, and stocks with a very low P/S ratio are known as 'value stocks'. However, what is considered a 'high' or 'low' P/S Ratio is relative and can vary across different sectors, so the best way to objectively assess this is to compare a company against its industry peers.
Based on its most recent financials, Ballard Power Systems Inc's P/S ratio is currently 34.7. This is 163% higher than the sector-wide average of 13.2. The fact that it is currently above the sector-wide average isn't particularly encouraging, and indicates that the stock may offer less value compared to other companies in the same sector.
Next, let's look at Ballard Power Systems Inc's price to book value (P/BV), which tells us how much investors are willing to pay for a company's assets. P/BV is used by value investors to identify potential investments, and is calculated by the company's stock price divided by its net assets (or 'book value', meaning the value of all assets which appear 'in its book').
Based on its most recent financials, Ballard Power Systems Inc's P/BV is 2.8, which is 8% lower than the industry benchmark of 3.
Finally, it's always worth looking at a company's debt profile before deciding to invest in order to assess the risk. A high amount of debt can be a problem if a company is not generating enough cash flow to service its debt, and some sectors rely on debt more heavily than others.
As of 25 Mar 2022, Ballard Power Systems Inc has total debt of $17.12m, and this has gone down by 4% over the past year. The company also has cash & short-term investments totaling $1.13bn, giving it a 'net debt' of $-1.1bn.
Based on these figures, Ballard Power Systems Inc's current levels of net debt don't worry us, as the company generates enough revenue to service its debt, and is not using debt to fund its operations, which is good to see.
BLDP stock: should you invest?
All in all, we’ve noticed some discouraging trends at Ballard Power Systems Inc.
Significantly, the stock is down by 8% YTD and down by 49% over the past year. Furthermore, compared to companies in the same sector, BLDP has a higher P/S ratio. This just doesn't give us much confidence that the company is on the right track.
In summary, we don't think Ballard Power Systems Inc is doing enough to earn a spot in your portfolio at the moment, but it might be worth adding to your watchlist to keep an eye on.
As with any stock however, there are additional factors to consider before making an investment decision. This analysis is general in nature and based on historical data, and it does not take into account your specific investing objectives or financial circumstances. Additionally, this article does not look at the macro environment where geopolitical headwinds, internal company changes and individual technicalities in the way a company conducts its business can have a significant impact on a company's long term outlook. Please do your own due diligence before deciding to invest.
