Is Plug Power Stock Ready to Take Off After Outstanding Revenue Growth?

As the world shifts from fossil fuels to cleaner fuels, there is strong growth potential for companies in green hydrogen and fuel cell technologies. Still Plug hole ( PLUG 9.79% ), a forerunner in the fuel cell industry, has taken its investors on a turbulent roller coaster ride. The stock was unstoppable when it increased more than fivefold in the space of three months and hit a high of $75.49 per share in January 2021. The euphoria subsided just as quickly, with the stock stacking at fuel plummeting to about $29 per share by the time the year ended.

Since then, the market has been waiting for the publication of its quarterly results and its forecasts for 2022 to help the stock regain its mojo. The company just released its numbers, and the market reacted positively and sent Plug Power shares skyrocketing today.

Although profitability is not yet in sight, the company is increasing its turnover at a steady pace. In fact, it generated its highest quarterly profit in the fourth quarter and ended 2021 with record revenue of $502 million. And the company is confident of exponential revenue growth in the future.

Strong revenue growth is a typical characteristic of growth stocks, and these stocks can potentially make a lot of money for patient investors.

Does this mean it’s time to buy shares of Plug Power? After all, the company plans to increase revenue by 80% in 2022 and grow it sixfold to $3 billion by 2025.

Image source: Getty Images.

That’s huge, but a business with such sales growth should also be profitable and cash flow positive. It may not be easy to plug in.

In 2021, it suffered a net loss of nearly $460 million despite a dramatic increase in revenue. At best, Plug Power expects to generate an operating margin of 17% by 2025. To achieve its goal, it invests in technology to reduce its service costs (the company does not just sell products of fuel cell, but also maintains them) and expects to reduce the unit cost of services by 45% by 2023.

At the same time, Plug Power is also expanding its footprint by tapping into industries other than material handling equipment for its fuel cell products and moving towards green hydrogen. Indeed, it wants to cover the entire value chain of green hydrogen because it aims to be the leader. The company is even building the world’s largest fuel cell and electrolyzer manufacturing plant in Rochester, New York, with production expected to start in the fourth quarter. Electrolyzers are devices used to produce hydrogen.

I believe green hydrogen holds the key to Plug Power’s margin growth and could eventually help it break even. Crucially, the company has the money to invest in hydrogen – it ended 2021 with cash and cash equivalents worth nearly $2.5 billion. Given the backdrop and its potential for sales growth, it might be worth keeping an eye on Plug Power stock.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.