FuelCell Energy, Inc. (FCEL)

How does a company lose money every year for 10 straight years and keep operating? The company says that they need to sell 75-100 MW per year to reach a positive net income. They had something like 20-30 MW of backlog at the end of 2007 (up from around 5-8 MW at the end of 2006). They are making progress.

But their present manufacturing capacity is 50 MW per year with a current expansion program up to 60 MW. So even if they grow their sales to 100 MW, they will have to invest a huge sum of money to deliver the goods. It seems that this will raise the required sales even higher. One good note, they have little debt. Which leads to the questions how does a company lose money every year for 10 years and still keep operating?

The stock price doesn't seem to be related to the company's performance. This stock jumps around so much, I am sure that there will be another peak soon. It has only happened like 5-6 times in the last 10 years. But the valleys seem to be getting lower.

So here is my guess: it will remain low for a short time and when fuel prices go up, it will jump up and then quickly drop again. I will pick outperform and then if it gains 50% (price of around $10), I will end my pick and then pick underperform.

IF, and I mean IF, they can get through the expansion phase, I think they will do well. Very long term (10 years): OUTPERFORM.