Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
week shares of Hydrogenics Corp.
took a steep dip down.Earlier in the
week the company filed a shelf registration statement to raise up to $100
million in new capital over the next two years.Then before the last day of trading began the company issued new
guidance for the year 2014, suggesting weaker sales in the first quarter than
previously expected but reaffirming expectations for the full year.
statement replaced an earlier shelf registration statement for a $25 million
capital raise.The filing came as no
surprise to investors, but the significant increase in the potential capital
raise may have given a few some pause. What seems to have thrown a wrench in
the chart is the disappointment over the first quarter sales guidance.
has been developing fuel cell technologies.The company’s expertise is in water electrolysis, a technology for
making hydrogen from water.Hydrogenics
earns much of its revenue providing on-site industrial gas generation services,
principally hydrogen.The company also
knows proton exchange membranes and produces fuel cells for energy storage
solutions.The company has managed to
increase sales each year, but is still operating at a loss.In the most recent twelve months Hydrogenics reported
$42.4 million in total sales, but suffered a loss of $6.1 million.
is understandable why shareholders might be sensitive to any whiff of a weak
top-line.However, in my view, the 10.6%
sell-off on Friday following the new guidance announcement was an
overreaction.An investment in a
developmental stage company should not hinge on the shift of revenue from one
quarter to another unless there are implications that market potential has
weakened or customers have been lost.Management did suggest that realization of backlog will be mostly in the
second half of the year.Such
announcements are often followed by additional delays.However, management also provides
encouragement that there its business pipeline is building, providing further
support for sticking to its guidance for$50 million in total sales for the year
and the possibility of finally reaching breakeven.
stock has been reset, perhaps appropriately if profitability is not yet within
the company’s grasp.Yet Hydrogenics has
made progress, establishing a credible foothold in its markets.Even if you are skeptical about Hydrogenics’ guidance
for 2014, the sell-off in HYGS might seem enticing to investors who are bullish
on the company in the long-term.Unfortunately, a review of recent trading patterns suggest there is now pronounced
bearish sentiment has now been registered in the stock that might take some
time to play out.It might be better to
wait for all selling to take its course before rebuilding positions.
Neither the author
of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies