Plug Power Inc (PLUG, Financial) recently reported a daily gain of 5.85%, despite a 3-month loss of 18.99%. With a Loss Per Share of 1.43, the question arises: Is the stock significantly overvalued? This article aims to provide a comprehensive valuation analysis of Plug Power (PLUG). Let's delve into the details.
Company Introduction
Plug Power is a pioneer in building a comprehensive green hydrogen ecosystem, encompassing production, storage, delivery, and energy generation. The company intends to construct and manage green hydrogen highways across North America and Europe, delivering its green hydrogen solutions directly to customers and through joint venture partners into various end markets. Despite the company's ambitious plans, its stock price of $8.69 is significantly higher than the GF Value of $3.66, indicating that the stock might be overvalued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on three factors: historical multiples at which the stock has traded, an adjustment factor based on the company's past returns and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, the stock is likely overvalued, and its future return could be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus, Plug Power (PLUG, Financial) appears to be significantly overvalued. With its current price of $8.69 per share, the stock's long-term return is likely to be much lower than its future business growth.
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Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Therefore, it's crucial to thoroughly review the financial strength of a company before deciding to buy its stock. Plug Power has a cash-to-debt ratio of 1.12, which is worse than 52.17% of companies in the Industrial Products industry. GuruFocus ranks the overall financial strength of Plug Power at 6 out of 10, indicating that the company's financial strength is fair.
Profitability and Growth
Investing in profitable companies carries less risk, especially those that have demonstrated consistent profitability over the long term. However, Plug Power has been profitable 0 years over the past 10 years, with an operating margin of -88.39%, worse than 95.59% of companies in the Industrial Products industry. This ranks Plug Power's profitability as poor.
Growth is one of the most crucial factors in the valuation of a company. The average annual revenue growth of Plug Power is 7.6%, which ranks better than 54.06% of companies in the Industrial Products industry. However, its 3-year average EBITDA growth is -94.2%, which ranks worse than 99.3% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Over the past 12 months, Plug Power's ROIC was -24.37 while its WACC came in at 15.27.
Conclusion
In conclusion, Plug Power stock appears to be significantly overvalued. The company's financial condition is fair, but its profitability is poor. Its growth ranks worse than 99.3% of companies in the Industrial Products industry. To learn more about Plug Power stock, you can check out its 30-Year Financials here.
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