Wednesday, November 7, 2012

Ballard Power Systems Inc

On my other blog I have written about investors being individuals and part of a mob...continue...

In the late 1990's I read about investing in small cap stock. The article said that you should invest in a basket that contained at least 5 stocks. The theory was that you could only lose what you have invested, but the sky's the limit to what you can gain. What you needed was only about 20% or 2 in 5 stocks being successful to make money on small caps. So, I bought a number of small caps, but I never made money on any of them.

The main problem was the bear market that occurred in the 2000. None of my stock recovered from that. Take this company, Ballard Power Systems Inc. (TSX-BLD, NASDAQ-BLDP), which I invested in, in 1997 and sold in 2006. I lost 5.3% per year or 38% of my investment. While, at least this stock is still around and on the stock market. I still think that fuel cells are a good idea, but I am also curious to see if they will ever make any money.

There are a couple of things that complicate viewing this stock. One is that its financial statements are in US$. The other thing is the change in outstanding shares. When outstanding shares change you get different growth rates between the company's growth and growth per share. Most of what I look at is growth per share.

For this company, the outstanding shares have gone down by 5.84% and 2.13% per year over the past 5 and 10 years. Mostly the outstanding shares have gone up a bit each year because stock options. However in 2008, for value received, Ford and Daimler returned some 34M shares to the company and these shares were cancelled. That year the outstanding shares fell 29% and this accounts for the decreasing shares over the past 5 and 10 years.

Revenue has grown by 8.8% and 7.7% per year over the past 5 and 10 years. Revenue per share has grown at the rate of 15.5% and 10% per year over the past 5 and 10 years. The difference in growth is due, of course, to the change in outstanding shares. Both these growth rates are lower in CDN$ terms.

There is no growth in earnings per share because this company has had positive earnings in very few years. Lately all earnings has been negative. Analysts feel that the company's losses will decrease over the next two years but do not see any positive EPS.

Looking at this on the CDN or US Stock exchange still shows the same thing. The stock price has been going down since 2000. In CDN terms, stock price has fallen 30% and 31% per year over the 5 and 10 years. Drop in stock price in US$ terms is similar.

There is also no growth in cash flow (or cash flow per share) as this company has no positive cash flow. As far as book value is concerned, this stock hit the top in 2001 and book value has been declining ever since. In CDN$ terms, book value is down 19% and 22% per year over the past 5 and 10 years.

Because there are no earnings, there is no Return on Equity.

The Liquidity Ratio is quite good at 1.88 for the financial year ending in December 2011. However, when you include the cash flow in this ratio it is down to 1.08. When you also consider spending on assets, this ratio is down to 0.99.

The Debt Ratio for the financial year ending in 2011 is good at 2.27. The current Debt Ratio is lower at 2.07. However, this is still a very good ratio. The current Leverage and Debt/Equity Ratios are fine at 1.93 and 0.93.

I think that the last thing to mention is that Cash and Cash Equivalents was $20M at the end of December 2011 and it is currently half of that, at $10M, at the end of September 2012. They do seem to be trying to reduce their costs.

I must admit that I am no longer interested in investing in a company that is not making any money. I still hope that they are able to make a go of their fuel cell technology.

Ballard Power Systems designs and manufactures clean energy hydrogen fuel cells. Better energy, delivered through our focused fuel cell innovations, offers the Power to Change end-user applications, while also improving the environment. Its web site is here Ballard. See my spreadsheet at bld.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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