What Makes Plug Power (NASDAQ:PLUG) Work?


The fuel batter manufacturer, Plug Power (NASDAQ:PLUG) may not have the best yield strategy in place at the moment. Analysts have coined a number that should be a decisive factor in helping investors to make the decision of whether or not to invest in Plug Power (NASDAQ:PLUG) stocks. That number is 112.5%.

This number is a representation of the company’s revenue cost spread over the last four quarters. It can be translated in to the fact that Plug Power (NASDAQ:PLUG) spends $1.13 to generate each dollar of its profit yields. Hence, the gross profit margin is negative 12.5. This negative trend has been ongoing for quite a while now, so much so that the last time Plug Power (NASDAQ:PLUG) was able to secure a positive gross margin figure was back in 2003. Since that time, Plug Power (NASDAQ:PLUG) is notorious for spending more to achieve less; the company spends $2 to earn $1.

Keen investors will keep a close eye on how the company trends in order to make a decision about investing their capital in company’s stocks. The current negative gross margins don’t work in favor of the company, but this figure is the closest Plug Power (NASDAQ:PLUG) has come to achieving a positive figure. The company went on to project a positive gross margin in Q2, however, that dream has never been realized in figures spread over a decade period.

The company CEO, Andrew Marsh feels that things will take a turn for the better in 2015. He has placed the gross target margin to reach 25% towards the end of 2015. This translates in to spending $0.75 to earn $1. Marsh has also estimated 10% target hit for gross margin come end-2015.

This is not the first time that Plug Power (NASDAQ:PLUG) has been over optimistic of its gross margin capital, only to fall way short of its exceedingly hopeful projections.

Marsh has been noted for his efforts to create a positive market vibe for the company’s gross margins in his estimates and this has been ongoing for several quarters now. He has been quoted as saying in 2009 that the company plans to increase volumes of unit shipments to generate increase in revenue figures, with the resultant gross margin reaching mid-teens.

His gross margin estimates for 2012 and2013 were 20% and 30% in his 2010 predictions, where he proposed cutting down on production once the shipped units reached the 4,000 milestone.

His statements, released in 2012 were more of an explanation for the continues lows in gross margins, putting most blame on out dated designs and fewer shipments than the previous predictions, as well as product pricing.

As opposed to his positive projections of the company gross margins, in 2009, the Plug Power (NASDAQ:PLUG) had achieved a gross margin of negative 60%. In 2010, it was negative 51% and went even lower to negative 55% in 2012. There is a slight improvement in 2013, where it is negative 42%.

The current gross margin of 12% put the company on forward block.