Coinciding with the accelerating interest in electric vehicle stocks over the past few years, investors have become increasingly focused on another niche of the renewable energy space: fuel cells. Plug Power (PLUG 0.32%) in particular has garnered considerable attention from hydrogen-focused investors; the stock has skyrocketed more than 1,400% over the past three years. Bloom Energy (BE +1.22%) has hardly enjoyed the same fanfare as its stock has only risen 77% over the same time period.
But investing is no popularity contest. Plug Power's incredible rise is hardly based on vastly improving fundamentals -- rather, it's more representative of a meme stock. Consequently, fuel cell focused investors would be better served to power their portfolios with Bloom Energy.
Image source: Getty Images.
Moving in the right direction
When analyzing the fundamentals of businesses, one of the most obvious areas to investigate is profitability. Fuel cell companies, however, have consistently failed to demonstrate that their businesses can be profitable endeavors. In addition to Plug Power and Bloom Energy, the other usual suspects in the industry, Ballard Power Systems and FuelCell Energy, have also failed to generate earnings.
Yet even with the red bottom line, Bloom Energy beats Plug Power in terms of showing promise for future profitability. Bloom Energy, for example, has consistently generated an annual gross profit over the past three years -- a period during which the company has booked an average annual gross profit of $127 million. And further down the income statement, there are more encouraging signs as Bloom Energy has been making fairly steady progress on its operating income and EBITDA margins. 
BE Gross Profit Margin data by YCharts.
Plug Power, on the other hand, hasn't achieved the same success regarding profitability based on its previous filings. The company had announced in March that it will be restating its financials for fiscal years 2018 and 2019 as well as quarterly statements for 2019 and 2020 due to "errors in accounting." It's unclear what Plug Power will ultimately reveal in its restated filings, but investors can be fairly sure that the company will not end up showing a more pronounced gross profit.
Trust Plug? I'll pass
In the press release announcing its plan to restate its financials, Plug Power claimed it doesn't expect an "impact to our cash position, business operations or economics of commercial arrangements." But I'm not holding my breath that things will quite work out that way. Plug Power's management has failed to garner trust with investors for years, and this is simply the latest example.
In 2013, for example, Andy Marsh, Plug Power's CEO, predicted that the company would reach breakeven on an EBITDA basis in 2014; it didn't, and it hasn't ever reported positive annual EBITDA. Companies fail to achieve their forecasts all the time. This case, however, seems particularly egregious considering the company has consistently failed to report positive EBITDA. To be fair, Plug Power has consistently met annual revenue guidance, but the company's inability to generate profits -- and its inability to communicate honestly about it with investors -- doesn't inspire a lot of trust.
Bloom Energy's management hasn't had the same issues. When it comes to being comfortable with one of the management teams at the helm, I'd much rather side with Bloom Energy.
Checking in with the price tags
Finally, it's worth taking a look at the stocks' valuations as further evidence that Bloom Energy is a better option than Plug Power. Since neither company generates profits or cash flow, we're left with the price-to-sales ratio as the yardstick by which we can compare the two stocks. Bloom Energy currently trades at 4.6 times sales -- slightly higher than the S&P 500 P/S ratio of 3.1. Picking up shares of Plug Power, however, is a much pricier proposition; shares are valued at 33 times sales.
Perhaps if the tables were reversed -- if Plug Power's stock were trading at a considerable discount and Bloom Energy's stock were exorbitantly high -- one could make a case that Plug Power would be the better buy, but at this point, it seems that the stock's valuations are simply the icing on the cake, proving that Bloom Energy is the better option for investors right now.
The fuel cell finale
Although Bloom Energy is the better option for investors seeking exposure to a fuel cell stock, it's critical to recognize that picking up shares of Bloom Energy still entails a considerable amount of risk. There's no guarantee that the company -- despite its consistently gross profit -- will be able to generate a net profit in the future. Therefore, only investors with considerable tolerance for risk should consider a position.
