Plug Power (PLUG +0.00%) has been on a volatile path in the market for more than a decade. Since 2014, the company has also been on a high-potential path as big customers like Amazon.com and Walmart expand their use of hydrogen power for forklifts in warehouses.
But as Plug Power has grown, it has increased the amount of cash it has burned and continually turned to shareholders and creditors to fund operations. Management thinks this time it has a sustainable business model. And if that's true, then this could indeed be a millionaire-maker stock.
Image source: Getty Images.
A long history of losing money
The chart below tells you a lot about Plug Power's operations over the past decade. The company has been losing money and burning cash with no end in sight. It's also true that over this time, revenue has grown from $14 million per year to $252.5 million over the past year, but that growth hasn't translated into profits or cash flow.
PLUG Net Income (TTM) data by YCharts.
Some observers may point to the optimistic projections that management has put out for growth and profitability, implying guidance for $1 billion in bookings per year by 2024. But those optimistic projections have been coming for years. Plug Power has failed to live up to its own guidance repeatedly for years. And despite lofty expectations of turning cash-flow positive years ago, that has yet to happen.
Any growth company eventually needs to turn that growth into profits or it'll run out of funding. And that's been a problem for Plug Power over the years.
Shareholders keep paying the price
To fund losses, Plug Power has long issued shares, which you can see in the massive increase in shares outstanding over the past decade. But it's recently started taking out more debt, increasing risk to the business.
PLUG Average Diluted Shares Outstanding (Quarterly) data by YCharts.
The increase in debt is significant. Either Plug Power generates enough money to repay debt or it continues to dilute shareholders to raise funds. The company has never shown the ability to make money, and until it does, I'll take a skeptical approach before believing its growth projections.
This isn't a millionaire-maker stock
Ultimately, the question facing investors is whether or not they think Plug Power's business can become profitable long term. We've seen that even huge contracts with Amazon and Walmart haven't driven the company to profitability, and if working with partners at that scale isn't going to improve the bottom line, then what will?
I don't think this is a millionaire-maker stock. As in years past, I wouldn't be surprised if management keeps on falling short of its own guidance and continues to issue shares, diluting shareholders. That's a bad combination in any business, and I think there are renewable energy stocks with more potential to make money long term.
