As current concerns about fuel supply and pricing show, the future of how we fuel ourselves could be big business. Ceres Power (LSE: CWR) AFC Energy (LSE: AFC) A few London-listed companies have alternative solutions to future energy needs. Here I consider whether it should be added to my portfolio today.
Ceres Power: Strong revenue growth
The Roman goddess Ceres was associated with, among other things, her torch carrying a young boy at the wedding. Light, energy and the prospect of an optimistic future also apply to alternative energy company Ceres Power. It is developing fuel cell technology, which it says could help deliver. “Clean energy to tackle climate change and improve air quality” In today’s political environment, this seems like a potentially big opportunity.
The company has attracted the attention of several world-class engineering companies, whose advice suggests that its technology could have a bright future. Last week, the company announced its interim results, which showed its revenue and other earnings nearly doubled. Order book strong. The liquidity of the company means that, although like many alternative energy companies, it continues to incur losses, leaving enough room to continue its current development activities without worrying about funding.
Is the share price of Ceres Power attractive?
So far so good. But there is a difference between a company with potential strong customer demand on the one hand and attractive shares on the other.
Ceres Power has been stubbornly damaged and so there is no price-to-earnings ratio that anyone can evaluate. But with market capitalization around b 2bn, I think the company looks expensive, even in the first half of Ceres revenue and other income came in at just £ 17m. This is a big difference.
If the company maintains losses, there are risks, including the potential need to increase liquidity, which could further reduce existing shareholders in this year’s equity issue. My risk for Ceres Power does not match tolerance, and I will not add it to my portfolio at this time.
AFC Energy Share: A punt on hydrogen energy
Hydrogen energy company AFC recently announced a partnership with Urban-Airport, which has excited some investors about the company’s potential. But, even before that announcement, AFC Energy had an interesting investment case.
The AFC has increased its market cap by 162% compared to last year, but still values 386m. But the financial aspects of it are not interesting to me. It wasn’t just a loss-as it has been for many years এটি it was historically no commercial revenue. A company that has no revenue and no loss is at risk of running out of money. This helps explain the company’s fundraising earlier this year. It has continued the long-term trend of shareholder delusion in the AFC.
The AFC also has an order book, though much smaller than Ceres. Last year, it signed a commercial agreement, which suggests that some customers see potential in its technology. But there are many unknown elements here. How fast can income grow? Will AFC be profitable? How can it compete in the space of increasingly crowded hydrogen energy? For now, shares of AFC Energy seem very speculative to me and I will not add the company to my portfolio.
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Christopher Rouen has no position on any of the shares mentioned. Motley Flower UK has no position on any of the shares mentioned. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.