Surging Sales, Surging Stock for H/Cell Energy

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Thursday, September 12, 2019

With the price of “clean” alternative energy coming down near that of conventional “dirty” energy, now is the time to be looking for disruptive companies in the alternative energy space. 

Case in point, there are companies like H/Cell Energy (OTCQB:HCCC) that have technology that can provide electricity for buildings with any excess electricity capable of being sold to the local utility for energy credits.  Like the idea of a net zero electricity bill while doing something good for Mother Earth?  H/Cell’s HC-1 systems utilize solar technology combined with hydrogen energy technology to deliver uninterrupted clean energy independent of the utility grid.

Simply put, the fully scalable system – comprised of solar panels, a hydrogen generator, fuel cell, tank and battery bank – uses solar power to charge the batteries.  Once full, the extra solar power is utilized to power a hydrogen generator that electrolyzes water, collecting hydrogen in a gasified state, which is stored in a tank.  From there, any excess energy can be sold to the local utility and sent to the grid.

The charged batteries provide the electricity for the building.  As the batteries drain, the solar technology recharges them.  If it’s dark and solar isn’t available, the stored hydrogen is processed in a fuel cell to re-energize the batteries.  When the sun comes up again, the cycle starts all over.

H/Cell has two prior installations in New Jersey that have validated the metrics and value of using the HC-1 systems.  Management is now ratcheting up its sales efforts for HC-1, using its legacy operations of security system integration to commercial and government clients in Australia and environmental systems solutions in the Mid-Atlantic residential and commercial markets as a springboard to market penetration domestically and internationally.

In fact, the company has over $40 million in bids outstanding, of which about $4 million is specific to renewable energy projects.  Last week, the company said that Q3 is going well with more than $1.2 million in contracts completed in recent months for various environmental systems and general contracting projects.

The projects included work done at various locations in Australia and the U.S. including the SCHHS Community Health Facility, St. Bernard State School, Gayndah Hospital, St. Columban’s College, Buranda Railway Station, Xcoal Energy & Resources, Maroochydore Ambulance, Pacific Lutheran College, Proserpine Police Station, Gap Inc. and Old Navy, a business of Gap, Inc. (NYSE:GPS).  

Shares of HCCC have been on the rise in the last week, jumping from a low of 40 cents on September 5th to as high as $1.45 on September 10th.  The stock has cooled some to hold around $1.00.  With only 7.6 million shares issued and outstanding and 2.1 million in the float, it doesn’t take much for the stock to move upwards very quickly with even slight buying pressure.

Shares have been catalyzed by the company releasing its latest quarterly report showing $1.93 million in revenue during Q2 and $3.63 million for the first half of 2019.

Extrapolating that throughout the year, without any consideration for growth, equates to $7.26 million in revenue.  Using 13.5% quarter-over-quarter growth like from the first to second quarter would lead to $8.31 million in revenue.

$8.31 million in sales from a company that even with the recent surge in stock price still has a market cap of only $7.65 million.  That would be a price-to-sales ratio of 0.92, which is arguably low for a growth stock.  Consider First Solar’s (NASDAQ:FSLR) P/S ratio is 1.8 (based upon guidance for 2019 sales ~$3.6 billion).

As H/Cell expands its footprint, investors should expect a re-balancing of the market capitalization to more accurately reflect the direction of the company.

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