It's hard to write about early-stage, rule-breaking technologies without coming off as something of a wet blanket. Until they reach critical mass, these companies tend to do little more than make pie-in-the-sky promises, burn cash, and replace it with more cash to burn by issuing new dilutive shares.

Does that mean these companies are doomed? Not necessarily. But for some companies, the numbers don't offer much hope to the contrary. Take, for example, FuelCell Energy (NASDAQ:FCEL), which reports its fiscal Q1 2006 results tomorrow.

Wall Street Wisdom:

  • General consensus. Half a dozen analysts follow FuelCell. Only one of them counsels selling the stock. One more says hold it. The other four all say buy.
  • Revenues. Three months ago, FuelCell predicted increased sales in fiscal 2006. The analysts agree, calling for a 9% year-over-year increase to $8.2 million in fiscal Q1.
  • Earnings. Well, clearly, there won't be any. But the analysts expect FuelCell's losses to contract a bit from the year-ago quarter's $0.40 loss, to a $0.37 loss this quarter.

Margin watch:
FuelCell's margins aren't easy on the eyes. There's not a positive margin to be found anywhere in the past 18 months' results. On the plus side, gross, operating, and net margins are all a bit less negative now than they were 18 months ago. FuelCell's business may not be improving quickly, but at least it's moving in the right general direction.

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All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish lookout:
The question individual investors should ask is: "How much will my shares be worth when the company finally turns a profit?" And I don't mean: "What will a share cost?" but rather, "What will a share get me? What will my ownership stake be?"

FuelCell has already diluted its shareholders by roughly 70% over the past five years, as its diluted share count rose from 28 million at the end of fiscal 2000 to 48 million at the end of fiscal 2005. There's no reason to expect further dilution in the immediate future, as the company has cash (and equivalents) on hand to fund its losses for about two more years. But as we move further down the road, it's important to keep in mind that dilution will come again unless losses begin to contract much faster than they're expected to do tomorrow. Just a word to the Foolish.

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Fool contributor Rich Smith has no interest, short or long, in FuelCell.