Hydrogenics: Powering Up

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by Debra Fiakas CFA

In the last post on Hydrogenics, Inc. (HYGS:  Nasdaq) in April 2014, the stock seemed to be languishing on news of a potentially dilutive common stock offering.  At the time profits still seem illusive.  However, over the last few months circumstances have improved.  Shares of Hydrogenics have moved higher on the company’s recent introduction of a fuel cell power system for medium and heavy duty vehicles.  Additionally, in July this year Hydrogenics was chosen by Ontario as one of five grid storage projects.  This has turned HYGS into an interesting stock to watch.

What sets Hydrogenis apart from the rest of the fuel cell developers is the company’s innovation of low pressure, dry air stack technology.  There is no need for air compressors or humidification equipment, offering a compelling value proposition.  Hydrogenics management is confident the manufacturers of large vehicles such as buses or heavy duty trucks find its fuel cell system easy to integrate.

The company is in a good position to move on the market opportunity for fuel cell cell systems.  Hydrogenics raised approximately $14 million in new capital in May 2014, through a common stock offering.  Cash balance at the end of June 2014, was $16.7 million.  Operations still require cash support, but we expect the cash burn rate to decline in the coming quarters.

The clutch of analysts following Hydrogenics have projected the company will report its first profits in the final quarter of 2014.  In the full year 2014, the consensus estimate is for earnings per share of $0.07 on $71.9 million in total sales.  Hydrogenics is scheduled to release third quarter 2014, financial results in early November.    It is worthwhile tuning in for that report.  Management should be able to provide some clues as to whether the consensus estimate is achievable.      

Debra Fiakas is the Managing Director of
Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.


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