uploads///Cash Flow Analysis of Renewable Energy Companies

Renewable Energy Companies Generated Less Cash Flow than Needed


Dec. 31 2015, Updated 10:11 a.m. ET

Cash generated versus cash required 

In fiscal 3Q15, renewable energy companies generated less cash than they required. For example, fuel cell companies’ average ratio of cash generated versus the cash they required was -10x in fiscal 3Q15. Meanwhile, the ratio of cash that EnerSys (ENS) generated versus the cash it required was 2x in fiscal 3Q15. FuelCell Energy (FCEL) and Plug Power (PLUG) had ratios of -5x and -28x, respectively. SolarCity (SCTY) kept its ratio at around -9.5x. A negative ratio is due to the negative cash flow.

The cash flow is an important part of a company’s financials. Lower cash flows increase a company’s chances of being caught in a vicious cycle of debt raising and refinancing. A negative cash flow indicates higher borrowing for R&D (research and development) activities.

Article continues below advertisement

Free cash flow per share

The FCF (free cash flow) is what’s left after the total capital expenditures from operating cash flows are spent. FCF is one measure of shareholder value. In fiscal 3Q15, the FCF per share for EnerSys was $2.86. FuelCell Energy, Plug Power, and SolarCity had a negative FCF per share of $3.15, $0.26, and $2.57, respectively.

The above graph shows the cash generated compared to cash required for renewable energy companies in fiscal 3Q15. It also shows the companies’ FCF per share.

The Guggenheim Solar ETF (TAN) and the VanEck Vectors Global Alternate Energy ETF (GEX) have an average price-to-cash flow ratio of 2.57x and 5.07x, respectively. The PowerShares WilderHill Clean Energy ETF’s (PBW) average price-to-cash flow ratio is 6.96x. A lower ratio indicates relatively high cash flows.


More From Market Realist

  • Open sign on a sidewalk
    Macroeconomic Analysis
    Top Reopening Stocks to Play the Shifting Market Sentiment
  • Morgan Stanley sign and stock numbers
    Macroeconomic Analysis
    Morgan Stanley's Buyback Stock Picks in 2021
  • Black Wall Street sign is sign of ethical investing
    Macroeconomic Analysis
    Ethical Investing Stocks and Funds for Your 2021 Portfolio
  • New York City skyline and Goldman Sachs logo
    Macroeconomic Analysis
    Goldman Sachs: Options Trade Picks to Play Earnings Season Volatility
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.