Monday, August 8, 2016

Ballard Power Systems Inc.

Sound bite for Twitter and StockTwits is: Expensive and risky? Personally, I would not buy this stock. I am following it as I am interested to see how things turn out for this company and fuel cells. See my spreadsheet on Ballard Power Systems Inc.

I do not own this stock of Ballard Power Systems Inc. (TSX-BLD, NASDAQ-BLDP), but I used to. Back in 1997, I read about Ballard and fell in love with the idea of cars running with fuel cells. I could help save the environment and also make some money. It was very attractive. I sold this stock in 2006 because it had lost its attraction. It did not seem that Ballard fuel cells would be in any car anytime soon. I was ahead in 2000, but the stock started to fall in October 2000 and never recovered.

Will this stock ever again come close to what I paid for it? I paid $17.35 a share in 1997. I sold in 2006 at $10.82 a share. I lost 5.3% per year or a loss of almost 38%. If I still had this stock I would have lost just over 85% of my purchase value or 9.5% per year.

Analysts are right that cite that the company has good debt ratios. The Liquidity Ratio for 2015 is 2.90 and the Debt Ratio is 3.24. For this any ratios at or over 1.50 is good. The Leverage and Debt/Equity Ratios are also good at 1.45 and 0.45. For these ratios anything below 2.00 and 1.00 respectively are good ratios.

However, the outstanding shares have been increasing especially in the past 5 years with growth in shares at 13.35 and 3.4% per year over the past 5 and 10 years. So for this stock you have to look at per share values.

For example, Revenue per share is down by 14.2% and 2.8% per year over the past 5 and 10 years, but Revenue is only down by 2.8% and is up by 0.5% per year over the past 5 and 10 years. On the other hand if you look at 5 year running average for Revenue per Share the decline is only 1.7% per year over the past 5 years and Revenue is up by 1.3% per year over the past 5 years using 5 year running averages. The above is in US$ as this company reports in US$.

There is little to value this stock by. They cannot make a profit, the book value is declining and they have no cash flow or dividends. If you look at Revenue in US$ the current P/S Ratio is 3.76 a value some 22.7% above the 10 year median P/S Ratio of 3.06. The current P/S Ratio is based on Revenue estimate for 2016 of $83.4M US$ and Revenue per Share at $0.53. This stock price testing suggests that the stock price is relatively expensive.

You get into the expensive range when the current ratio is 20% or above the 10 year median ratio. So it is not that relatively expensive. On the other hand for some companies a P/S Ratio of 1.00 or below is showing a good stock price. Their P/S Ratio is well above 1.00.

The only other possible valuation is using the Graham Price. For 2018 analysts expect earnings to be $0.01. This would imply a Graham Price of $0.50 CDN$. The current price is $2.63 CDN$. This would give us a Price/Graham Price Ratio of 5.31. A ratio of 5.31 is quite a high P/GP Ratio and implies that the stock price is expensive.

When I look at analysts' recommendations, there are 3 of Buy and Hold. The consensus would be a Hold. The 12 months consensus stock price is $3.10 CDN$ ($2.38 US$). This implies a total return of 18%.

Karen Thomas wrote a positive article in April at Motley Fool. Unfortunately, I have heard this all before. Travis Hoium in August at Motley Fool talks about the stock jumping 54% in July because they signed a deal. This has also happened many times in the past. James Elliot at Microcap Daily also says positive things about this stock. I am still not biting.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see that report here.

The last stock I wrote about was about was Savaria Corporation (TSX-SIS, OTC-SISXF)... learn more . The next stock I will write about will be DirectCash Payments Inc. (TSX-DCI, OTC-DCTFF)... learn more on Wednesday, August 10, 2016 around 5 pm. Tomorrow on my other blog I will write about Dividend growth (again) learn more on Tuesday, August 9, 2016 around 5 pm.

Ballard Power Systems, Inc. is a global leader in PEM (proton exchange membrane) fuel cell technology. They provide clean energy fuel cell products enabling optimized power systems for a range of applications. Ballard offers smarter solutions for a clean energy future. Its web site is here Ballard Power Systems Inc .

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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