As unsettling as the recent market volatility may be for some, savvy investors know that they're better served keenly searching for ideal buying opportunities rather than ruefully staring at adversely affected portfolios. So, in the spirit of examining potential candidates for our portfolios, let's turn our attention to Plug Power (PLUG), a global leader in fuel-cell solutions

While the S&P 500 has dropped about 3.2% over the past three months, shares of Plug Power have tumbled nearly 3.7% during the same period. This, in addition to the fact that management recently issued an upwardly revision of its annual revenue forecast for 2018, suggest that now is a good time to consider whether Plug Power's stock could be a worthy choice to help electrify investors' portfolios.

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Image source: Getty Images.

Keeping current with the case for the bulls

Most recently, management fueled investors' optimism when it announced that instead of expecting to report $155 million to $180 million in sales for 2018, it now believes Plug Power will book $175 million to $190 million. How does this stack up to the company's previous performance? If Plug Power achieves the midpoint of this guidance, it will represent both a company record and a 77% gain over the $103 million that the company reported in annual revenue for 2017. 

According to Andy Marsh, Plug Power's CEO, the source of the forecast revision is "a result of continued domestic and international growth across our lines of business paired with a strong deal pipeline." Specifically, though, the predominant driver for the improved performance is the company's approximately $600 million deal with to help provide fuel-cell solutions to some of the retailing giant's warehouses.

Additionally, the company's progress in reducing expenses provides another source of inspiration. In Q2, Plug Power reported an adjusted gross margin (which excludes customer warrants) of 8.1% -- far exceeding the negative 1.9% it reported during the same period last year. And management seems optimistic that the company will continue to power ahead in reducing expenses. In fact, on the company's conference call, management forecast "positive free cash flows in the second half" as well as achieving breakeven on earnings before interest, taxes, depreciation, amortization, and stock-based compensation for the second half of the year.

Of course, a vote of confidence from Wall Street doesn't hurt the bull's case for the stock. In August, Oppenheimer initiated coverage on the stock, assigning it an outperform rating and a $2.50 price target.

Bear in mind the bear case

Plenty of investors may be charged up about the stock's prospects, but one would be remiss to contemplate buying shares without considering the company's track record. It seems reasonable, for example, to believe that the company will count 2018 as a record year in terms of sales since growing the top line over the past 10 years has been the company's strong suit.

PLUG Revenue (Annual) Chart

PLUG Revenue (Annual) data by YCharts.

Regarding cash flow and profitability, though, investors should be much more circumspect, for management has a well-documented history of over-promising and underperforming.

In early 2017, for example, management forecast using between $25 million and $35 million in cash from operating and investing activities for the year; instead, the company reported a cash outflow of $104 million for operational and investing activities. Similarly, the company guided for a GAAP gross margin of 8% to 12% for 2017; however, it actually reported a negative gross margin of 27% for the year.

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Image source: Getty Images.

Another area of concern regarding Plug Power is its apparent lack of progress in China -- a country management characterizes as a significant opportunity in the electric vehicle market. Trying to assuage investors' concerns that the company is just spinning its wheels, management asserted on its recent Q2 earnings report that the "process is progressing" as the company attempts to find a partner who can help it prosper in China. Ballard Power Systems (BLDP 1.29%), on the other hand, has the pedal to the metal in the Middle Kingdom since inking a noteworthy deal with a major China-based automotive manufacturer, Weichai Power, over the summer. Among other things, the deal will net Ballard $90 million in cash thanks to a technology transfer program.

The electric takeaway

With 2018 shaping up to be a record year for Plug Power in terms of revenue, it seems that current shareholders will have something to celebrate when the ball drops in Times Square. Still, plenty of uncertainty lies ahead for the company. The company's success in growing the top line is undeniable, and I wouldn't be surprised if it continues to sign major deals that further fuel top-line growth. But whether the company will ever be able to grow sales enough to reach economies of scale and generate profits is far from a certainty. 

Consequently, I think that even though the stock is trading at 3.16 times trailing sales, well below its five-year average of 6.27 times, according to Morningstar, it's far from a compelling valuation, and the stock should only appeal to those investors with the highest tolerance of risk.