Plug Power wants you to plug in to hydrogen fuel cells. Image source: Getty Images.

Over the past 52 weeks, investors have sold off shares of Plug Power (NASDAQ:PLUG) stock to the tune of a 20% loss.

Here are three reasons they're right.

But first, a few words on why they might be wrong

Panning Plug Power has been a pasttime of mine for years. In fact, I've been doing it since 2005. 12 years later, though, Plug is still chugging along today, alive if not exactly well, and valued at nearly $300 million in market capitalization.

So, what keeps Plug going? Dreams, for one thing. The prospect of a world that runs on technology turning nearly clean hydrogen gas into completely clean electricity and water holds a lot of appeal for the green energy crowd. Time has proven that this appeal will not soon evaporate, and there's no guarantee Plug Power will fail in the end.

In fact, the opposite may be true. A quick review of the three "big" players in the fuel cell world (where "big" is a relative term, and no one exceeds $500 million in market capitalization) shows that over the past five years, Plug Power has outperformed rivals Ballard Power (NASDAQ:BLDP) and FuelCell Energy (NASDAQ:FCEL) as well, growing its sales at a 40% annualized rate, and its profits (or rather, reductions in losses) by 38%. FuelCell is closest to catching Plug in the sales race, while Ballard has done the second-best job of growing earnings -- slash reducing losses.

All that being said, there are still as many reasons to doubt Plug's ability to earn an investor a profit today as there were a decade ago. Here are three of the best.

Plug has the most debt

With $64 million in debt on its books, Plug Power has the highest ratio of long-term debt to equity (0.56) of any of the fuel cell names discussed above. Granted, Plug also has $66 million in cash on its balance sheet -- enough to leave it (barely) in a net-cash position.

That said, relative to the competition, FuelCell Energy carries a similar debt load of $66 million -- but $94 million cash. Ballard Power has only $8 million in debt on its books and $41 million cash. In terms of financial flexibility, the ability to make acquisitions, and fund investments, both FuelCell and Ballard have Plug Power outclassed.

Plug achieves the weakest margins

Another area where the competition has Plug beat is in profit margins. Plug may be "growing" its non-existent earnings faster than its also-money-losing rivals are. But the Plug's profit margins are still anything but encouraging. According to data from S&P Global Market Intelligence, Plug Power reported gross profit margins of just 0.2% over the past 12 months (that's two tenths of 1%).

In contrast, FuelCell's 2.4% gross profit margin of 2.4% looks positively robust, and Ballard's 23.3% gross is almost enough to make it look profitable by comparison. At least, that's how it looks until you read down to where all three companies are still posting negative operating and net profit margins. And even there, Plug Power is worst-in-class, losing more than $0.57 for every $1 in revenue it takes in.

Plug's growth prospects seem sketchy

So, why do some investors continue to cling to the hope that Plug Power will one day turn the corner and earn a profit, and perhaps even earn some profits for their portfolios? Well, hope springs eternal, and right now, analysts actually have Plug Power pegged for the fastest five-year earnings growth rate of the three fuel cell powerhouses.

According to data from, analysts who follow this industry see Plug Power growing its earnings (or actually, as we've come to understand, shrinking its losses) at the rate of 25% annually over the next five years. Relative to the projected 15% earnings growth rate assigned to FuelCell Energy, or the 0% growth projected for Ballard, 25% growth probably sounds pretty good!

And yet curiously, these same analysts who expect so much out of Plug Power over the long term have less aggressive objectives for the near term. Over the next year, analysts actually see Plug Power growing slower than its rivals, with its 38% historical growth rate decelerating to 25% -- while FuelCell Energy and Ballard Power accelerate their growth rates to 42% and 47%, respectively.

Foolish final thought

Granted, if you believe these analysts have a better view into the future five years out than they do into just the next year, you may agree with them that Plug Power will grow faster in the long term than it will in the short term. It's generally been my experience, though, that people see things better up close than from far away.

Consider, too, that Plug Power's weak profit margins and high debt load endanger its ability to even stick around another five years. Much as we might like to see Plug Power succeed, even thrive, and lead us all into a completely clean-energy future -- we've been waiting for this to happen for a decade already.

If it hasn't happened by now, I see little reason to hope it will happen five years from now, either.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning 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 richer.