Ballard Power Systems Inc. (USA) (NASDAQ:BLDP) did not have a good third quarter. The Company reported a decrease of 22% in revenue, 20% increase in operating costs and a net loss of $4.1 million or 3 cents per share. The $4 million does not seem to be large however one has to take into account that Ballard is not a large company and has revenue of only $16 million and a market cap of $185 million. The business model of Ballard is basically clean energy. The company provides non-polluting cells (primarily hydrogen cells) to be used for non-emission of carbon based compounds or other polluting substances.
Analysts have suggested either a buy or a hold for the company’s stocks and expect the shares to have a short term rally for a 50-100% premium. Most analysts seem to base their optimism on historical price records of the company and that is fine, however there is more to it than just simple price comparison.
First of all Ballard is currently trading at $1.28 per share, this is less than half its one year high of around $3. It is true that the company’s stocks have seen prolonged decline in the past one year but it is also a fact that the shares of the company are so cheap that the risk of buying it are mitigated to some extent.
More importantly the company is in clean fuel business, the recent Paris summit is strongly expected to lead to an increase in obligation to turn to cleaner sources of energy, for example recent reports from China show that the government is looking for alternative sources of energy and there is a good possibility that various governments around the world will make use of clean fuel mandatory to some extent or the other.
Ballard Power Systems Inc. (USA) (NASDAQ:BLDP) with its clean cells is well placed to benefit from the expected changes in policies; in fact it recently concluded a $3 million deal with a Chinese transportation company and has 4 other deals in the pipeline. Hydrogen cells are one of the most usable forms of alternative energy and are far easier to incorporate than solar cells. Therefore is can be reasonably concluded that the company has a good growth potential and is seriously undervalued currently.