When your flaky, deadbeat friend from high school suddenly hits the jackpot with a new job or a savvy investment, it's extra surprising. That's how I feel about Plug Power (PLUG -13.87%). The company just can't seem to get its act together, and yet its stock price has risen more than 350% in the past year! Is Plug finally turning itself around, or should investors continue to steer clear?

Let's take a closer look at this longtime underperformer to find out. 

A man covered in scorch marks holds together two electric cables.

Image source: Getty Images.

Hydrogen's hot

Hydrogen flames are invisible to the naked eye, which adds an extra element of risk to working with hydrogen fuel. That's kind of like hydrogen stocks right now: They're super hot, but just to look at them, you can't tell why, which makes investing in them risky.

There have been some small bits of promising news for Plug, including its recently announced deal with U.K.-based Walmart (WMT -0.10%) subsidiary Asda to power its forklift fleet with fuel cells. Perhaps the biggest development of the past year for Plug is its move to vertically integrate its operations by purchasing hydrogen producer United Hydrogen and electrolysis specialist Giner ELX. According to Plug, this will help the company achieve its goal of using 50% green hydrogen -- that is, hydrogen that isn't extracted from a fossil fuel like natural gas -- by 2024.

The big hype for hydrogen, though, seems to have stemmed from the hype surrounding fuel cell-powered truck promoter Nikola (NKLA 8.36%). Nikola's splashy reverse merger in June and its colorful founder, Trevor Milton, garnered big headlines for the company and interest in fuel cells in general. But behind the heat, where's the fire?

Plug's not

Right now, Plug's fuel cells are a niche product, used primarily in warehouse forklifts. The energy company has been able to grow sales within that niche, thanks in large part to big deals with Walmart and Amazon. However, if Plug really wants fuel cells to take off, it needs to break into the heavy-duty motile market (think delivery vans, trucks, buses, etc.). 

That quest has proven elusive for the 20-year-old Plug. In February, it launched a heavy-duty "ProGen" hydrogen engine for on-road applications, and launched a partnership with Lightning Systems to offer a fuel cell-powered Class 6 delivery truck, but hasn't announced any buyers. In fact, on the second-quarter earnings call, CEO Andy Marsh said, regarding motive applications in general, "It's probably early next year/mid next year where ... we expect to have an announcement." He added, "As I've said before, we expect to be putting vehicles on the road at small scale this year."

The cash is what's burning

Despite more than tripling its revenue over the last five years, Plug can't seem to convert that top-line growth into bottom-line profitability. It hasn't posted a single profitable quarter since 2014. Worse, its cash burn has accelerated, even as its revenue has improved, growing from about $30 million/year in 2013 to about $60 million/year in 2019. With the recession, it's likely to be even worse in 2020.

To keep itself afloat, Plug keeps issuing more shares of stock, diluting the value of existing shareholders' positions. In August, Plug announced the issuance of 30.7 million new shares, which will raise more than $300 million for the company. Added to the 316.7 million shares outstanding, that's a 9.7% dilution, which comes on top of 78.5% dilution over the last five years. Perhaps even worse, the company has also racked up nearly $300 million in debt during the same time period.

These trends aren't good, and they show no signs of an imminent reversal.

Steer clear

Like a hydrogen fire, Plug Power's stock looks like a disaster to avoid. Its recent run-up in price doesn't seem to be justified by any of the company's fundamentals or its prospects. It isn't making money from its core business of selling and servicing forklifts, and in fact seems to be losing more and more money even as it increases sales. Its goals of vertical integration and motile applications are years away at best. Smart investors should give this company a wide berth, lest their investments go up in smoke.