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Is AFC Energy plc The Perfect Partner For Genel Energy PLC And Dragon Oil plc In Your Portfolio?

Shares in AFC Energy (LSE: AFC) are up by 10% today after the alkaline fuel cell technology company released very positive news flow. It has executed a heads of agreement with a leading Thai industrial gas company, Bangkok Industrial Gas Co, to commence a programme of commercial fuel cell deployment.

An initial 10 megawatt of installed AFC fuel cell capacity will be developed across three phases, with the first phase of 2 megawatts set to be installed by the end of 2016. A joint venture is also set to be evaluated this year between the two companies with a view to developing the initial fuel cell from Bangkok Industrial Gas Co’s own sources of hydrogen in Thailand.

And, looking further ahead, the second and third phases of the agreement are due to be completed in 2017 and 2018 respectively, with AFC stating that following the successful completion of the programme, the two companies will assess a number of other fuel cell deployment opportunities across Thailand.

Future Potential

Today’s gains take AFC’s share price appreciation to an incredible 344% since the turn of the year. And, looking ahead, there is the potential for further gains, since the use of alkaline fuel cell technology is forecast to increase moving forward. As such, AFC appears to be a potentially highly rewarding stock, albeit with the risk that news flow disappoints in the short run.

Clearly, the fortunes of AFC in recent months contrasts with those of energy stocks such as Genel (LSE: GENL) and Dragon Oil (LSE: DGO). In Genel’s case, its share price has fallen by 25% since the turn of the year and, while Dragon Oil is up by 15% during the same time period, this pales into insignificance when compared to AFC’s recent gains.

And, with the oil price set to remain low over the medium term, it could be argued that AFC is a better buy than Genel and Dragon Oil. Certainly, it has huge potential to continue to deliver capital gains, but so too do Genel and Dragon Oil. For example, Genel is expected to return to profitability this year and then go on to post a gain in its bottom line of 86% next year. And, with its shares trading on a price to earnings growth (PEG) ratio of just 0.2, it seems to offer excellent value for money.

Meanwhile, Dragon Oil is expected to have a challenging 2015 before increasing its bottom line by 45% next year. And, with it having a price to earnings (P/E) ratio of 14.2, it appears to offer excellent capital gains potential at its current share price.

As such, and while the three companies have been a mixed bag so far in 2015, they seem to offer strong medium term potential, although their share prices are likely to remain highly volatile in the near term.

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Peter Stephens has no position in any shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.