On an up day for stock markets generally, there was one surprising loser in Tuesday trading: Alt-energy play FuelCell Energy (NASDAQ:FCEL) saw its shares sink 3.3% despite a 0.6% rise elsewhere on the Nasdaq. This was particularly surprising given that we just learned that FuelCell’s own Chairman of the Board has been actively buying shares — 140,000 of them — and at prices significantly higher than what FuelCell costs today.
Specifically, according to Form 4 filings with the SEC, FuelCell Chairman John Rolls purchased 140,000 shares of his company on June 26, increasing his stake in the company by more than 14% to 1.1 million shares. Rolls paid $1.02 per share for his purchases. That may not sound like much, but at FuelCell’s current depressed stock price ($0.98), he paid about 4.5% more than it would cost an outside investor to buy those same shares today.
But should you buy them?
What does it mean to you?
It depends on how you look at the numbers. From one perspective, the $25.6 million in losses FuelCell reported over the past 12 months is… well, it’s certainly not good news. But it is better than the $38 million that FuelCell lost last year, or the $34 million it lost the year before that. Broadly speaking, GAAP-reported net losses appear to be trending downwards at FuelCell. Meanwhile, the company has nearly $56 million more cash than debt on its balance sheet, suggesting it may have enough funds to keep it afloat till profits at last turn positive.
Other perspectives are not so optimistic.
For example, free cash flow at the company for the past 12 months has been negative $62.6 million. That’s more than twice FuelCell’s reported losses as calculated under GAAP, and it makes the past 12 months one of the worst such periods for cash-burn at the company in the past five years.
Longer-term, the company hasn’t reported positive net profits since 1997, or positive free cash flow since 1998. Indeed, even investors encouraged by the Chairman’s purchase this week need to consider whether, given its history, FuelCell will ever turn a profit.
Given its record, I kind of doubt that it will.
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