The emergence of clean energy and the concurrent pushback from fossil fuel enthusiasts show that the global energy mix has reached a pivotal moment. Therefore, opportunities are abundant in the energy sector. One such opportunity is hydrogen, and moreso green hydrogen, a market forecasted to grow by 39.5% per year until 2030.
Although hydrogen stocks have systematic support, prudent screening is critical as numerous growth traps exist. As such, I embarked on a robust screening process, emphasizing company fundamentals, valuation attributes and event-driven features. Moreover, I phased in technical analysis whenever necessary.
The risk profile of hydrogen stocks might not suit everyone’s investment objectives. However, if your risk-return appetite aligns with what I mentioned, here are three best-in-class hydrogen stocks to watch.
Air Products and Chemicals (APD)
Air Products and Chemicals (NYSE:APD) distributes gases and chemicals for industrial use. The company has also established itself as the world’s leading vertically integrated hydrogen supplier. Although it is an established company, Air Products and Chemicals’ green hydrogen exposure provides renewed growth prospects, conveyed by its five-year compound annual growth rate (CAGR) of 6.26%.
Furthermore, the firm’s near-term variables are promising. For example, Air Products and Chemicals recently released its third-quarter earnings report, revealing an earnings-per-share beat of 16 cents. Additionally, the company reported an earnings before interest tax depreciation and amortization (EBITDA) margin of 42.4%, illustrating its operational efficiency.
APD stock has a few catalysts. For instance, Air Products and Chemicals recently signed a supply deal with TotalEnergies (NYSE:TTE) that will start in 2030. Moreover, APD stock has hit a momentum trend by trading above its 10-, 50-, 100- and 200-day moving averages.
I’m bullish here, folks!
ITM Power (ITMPF)
ITM Power (OTCMKTS:ITMPF) is a U.K.-based clean energy storage and clean fuel company. The firm participates in the hydrogen industry by designing and manufacturing hydrogen energy systems for production and storage. Unlike Air Products and Chemicals, ITM Power is early in its life cycle, allowing investors to invest at a”smart money” stage.
As mentioned, ITM is largely unestablished. As an example, the firm released its year-end fiscal 2023 results, revealing £5.2 million in revenue and an unimpressive EBITDA of -£94.2 million. Consequently, ITMPF stock has shed 44% ever since. Nevertheless, I think a speculative opportunity exists, given the firm’s systematic support, a newly announced turnaround plan, and strong cash position of £282.6 million.
ITMPF stock’s relative strength index has dipped to around 44, suggesting it has experienced excess selling pressure from investors. In addition, the stock has an Enterprise Value-to-Revenue multiple of 6.3x. These numbers coincide with its fundamental underperformance. However, a potential turnaround, paired with comprehensive hydrogen uptake, might send ITMPF’s stock flying.
This is a speculative bet that could pay off if timed correctly.
Bloom Energy (BE)
Bloom Energy (NYSE:BE) is a U.S.-based producer of solid oxide fuel cells. The firm is committed to the green economy by delivering hydrogen fuel cells and providing ancillary services. In addition, the company emphasizes speed, as its solid oxide hydrogen fuel cell technology enhances the production and usage of hydrogen.
Furthermore, Bloom Energy has experienced event-driven support. For example, the company recently announced a strategic partnership with Chirisa Technology Parks, relating to a supply agreement for Chirisa’s CoreWeave data center. Additionally, Bloom Energy released its first-quarter results in May, revealing a $14.1 million net loss narrowing and a capacity agreement deal with Intel (NASDAQ:INTC) relating to “the installation of additional megawatts (MW) of Bloom Energy’s fuel cell-based Energy Server at Intel’s existing high-performance computing data center in Santa Clara, CA.”
The abovementioned factors play into Bloom Energy’s existing CAGR of 16.21%. Moreover, Bloom Energy’s growth is accompanied by a price-to-sales ratio of 2.1x, which I deem favorable. As such, I am confident that BE stock is undervalued.
On the date of publication, Steve Booyens did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
