Intelligent Energy (LSE: IEH) extended its decline today, dropping at much as 11% by midday as investors continued to fret about the company’s sky-high valuation.
Investors have only been able to trade Intelligent’s shares for a few days, but the company has already seen its share price plummet, from the issue price of 340p, to 227p at time of writing.
Intelligent is one of many UK based fuel-cell manufacturers. The company is developing hydrogen fuel-cells to generate clean electricity, a technology that is in demand, as consumers seek less-polluting sources of power.
Indeed, Intelligent has already partnered with Suzuki to develop a prototype fuel cell motorcycle. More recently, the company revealed that it was working with Ascend Telecom Infrastructure to install technology at its telecommunications towers across India.
Fuel cells have huge potential and have multiple uses. The most lucrative market for this technology is likely to be the automotive industry, although cells can be employed in portable electronic devices such as laptops, or in small-scale district power and heat plants. Intelligent has also developed a fuel-cell mobile phone battery charger.
Looking for cash
Intelligent raised $55 million from its initial public offering and the company has some wealthy backers. In particular, Singapore’s sovereign wealth fund has invested $79.9m in the company.
The company has stated that it will use this cash to fund research and development.
However, despite Intelligent’s huge potential, the company remains loss making and for this reason, it appears as if investors are getting worried about the company’s lofty valuation.
For example, at present levels Intelligent is worth £427m, although the company reported a net loss of £21m for 2013, on revenues of £21m.
That being said, during 2012 Intelligent did report an after-tax profit as the company benefited from beneficial tax treatment. Excluding tax gains, Intelligent reported a pre-tax loss of £1m for 2012 and a pre-tax loss of £30m for 2013.
Aside from Intelligent’s losses, what’s more worrying is the performance of the company’s peers. Specifically, all of Intelligent’s London listed peers, which are active in the fuel-cell industry, including AFC Energy and Ceres Power, have failed to turn a profit during the past few years and seen their share prices collapse as a result.
It remains to be seen if Intelligent can succeeded where others have failed.
Still, only you can decided if Intelligent Energy fits in your portfolio and I'd strongly suggest you look a little closer at the company before making any trading decision.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.