The siren song of fuel cell stocks has destroyed a lot of value for individual investors in the last decade. While fuel cells may seem like a good idea on paper or in company presentations, the reality is that slinging electrons around to store energy and create power can be accomplished easier with other technologies.

That hasn't kept investors from believing in the potential of Plug Power (NASDAQ:PLUG) over the years. The business promised that 2018 would mark an inflection point, thanks both to the readying of next-generation technology and a giant leap into China. It didn't quite work out that way: Shares lost 47.5% of their value last year, and it would've been even worse were it not for a furious surge in the last two weeks of December.

Now that the calendar has flipped to 2019 investors are likely hoping for a fresh start for the business, but obstacles remain. What should Plug Power shareholders expect in the year ahead?

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By the numbers

Investors can't know where Plug Power is headed until they understand where it's been. The company announced preliminary full-year 2018 results in early January, but didn't provide GAAP numbers (not even for revenue -- more on that below), so investors should stick to the most recent numbers in SEC filings to play it safe.

In the first nine months of 2018 the business delivered $114 million in revenue, marking a 66% increase from the year-ago period. The business was able to drive down gross loss to just $1.9 million and operating loss to $56.5 million, compared to $27.4 million and $84 million, respectively, in the same period of 2017. Here's how each of the company's four segments -- products, services, power purchase agreements (PPAs), and fuel deliveries -- fared in the first nine months of 2018.

Metric

First 9 Months 2018

First 9 Months 2017

Year-over-Year Change

Revenue, products

$66.1 million

$47.9 million

38%

Revenue, services

$16.3 million

$10.5 million

55%

Revenue, PPAs

$16.3 million

$7.6 million

114%

Revenue, fuel deliveries

$16.0 million

$2.8 million

471%

Gross profit, products

$13.2 million

$3.5 million

277%

Gross profit, services

($0.8 million)

($4.2 million)

N/A

Gross profit, PPAs

($10.7 million)

($14.2 million)

N/A

Gross profit, fuel deliveries

($3.6 million)

($12.4 million)

N/A

Source: SEC filing.

As the table above shows, the improving trend in earnings was driven primarily by higher volumes of product sales. Growth from the only profitable segment and shrinking losses elsewhere enabled a sharp improvement in cash burn. Plug Power used $41 million in cash on operations in the first nine months of 2018, compared to $81 million in the year-ago period. That's still a relatively high number, especially considering the business exited September with just $14 million in cash on hand, but at least operations were headed in the right direction.

The numbers above also show where Plug Power should focus its bandwidth to achieve sustainable operations in the near future. Is that what management plans to do in 2019?

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What's ahead?

Plug Power released preliminary full-year 2019 guidance calling for $235 million to $245 million in "gross billings" and positive adjusted EBITDA. "Gross billings" is a non-GAAP metric that roughly translates to revenue, but it provides too much wiggle room to count revenue that hasn't actually been received. For what it's worth, the company preliminarily reported gross billings of $183.5 million for 2018, which means revenue will be lower than once formally announced.

Misleading metrics aside, the company said it plans to establish three to four new global partners in 2019 to expand its reach in material handling (forklifts), airport vehicles, on-road vehicles, and stationary power sources. That's a pretty vague statement, so investors will be looking for more detailed information in this area as well once full-year 2018 earnings are formally announced. Interestingly, the most recent announcement was devoid of any mention of China, which was a key piece of the company's storytelling last year.

Most important of all, investors will be watching to confirm that Plug Power is growing revenue in the most profitable segments. If next-generation fuel cell stacks deliver on the promised operating specifications, that should be enough to drive increased sales volumes. Placing more products in the hands of more customers is important because it increases the number of opportunities to generate recurring revenue from services, PPAs, and fuel deliveries. Although each of these segments operated at a loss in the first nine months of 2018, scaling operations is likely the best way to enable earnings in the future.

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Is this time really different?

Early last year I didn't think Plug Power would improve margins as much or as quickly as it actually did -- each segment improved sharply from the year-ago period in the first nine months of 2018. While that's encouraging, the business will need more than one year to achieve sustainably profitable operations. The goal to achieve positive adjusted EBITDA doesn't necessarily mean the business will be delivering operating profits or generating cash from operations, both of which appear unlikely based on the most recent SEC filing.

Simply put, Plug Power made a respectable amount of progress in 2018. However, it's still losing too much money and requires too much outside capital to be worthy of consideration for your portfolio at this time.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.