I have been consistently negative on FuelCell Energy (NASDAQ:FCEL) stock. I wrote about it on Feb. 2 when it was around $21.43 and on May 27 at $9.84 that FCEL stock would likely keep falling. And Monday it closed at $6.14 but I continue to argue that it is overvalued.

You might think, why would I say keep selling this stock when it is already down so far so fast?

The problem lies in the fundamentals of the company’s core earnings. As a result, look for FCEL stock to keep dropping. So if you haven’t sold yet, which is hard to believe, you still have time to get out. This article will try and give you a sense of why FuelCell is not a good investment. This is despite the fact that FCEL stock is a play in the green energy category that is appealing to many investors.

Why FuelCell Energy Is Likely To Keep Falling

FuelCell Energy delivers fuel cell energy platforms, mainly hydrogen-to-electricity conversion platforms. It presently has a pipeline of 43 megawatts (MW) of energy deals with a current capacity of 32.6 MW.

The problem is the company sells electricity over time under power purchase agreements (PPAs), which are often for a period of 20 years. It does not recoup the equipment costs, which it has to fund with huge upfront capex spending, until well into the PPAs. Due to competition, especially from traditional power producers, the company is stuck making losses for a long time.

In fact, and this is almost hard to believe, the company reports negative gross margins. For example, revenue for the quarter ending April 30 was $13.95 million, down 26% from the prior-year period. But its gross margin was negative $4.756 million.

This means that the cost of goods sold (the electricity itself, not the overhead) is higher than the revenue by $4.756 million. On top of that its loss from operations was $17.39 million. However, the EBITDA loss (earnings before interest, taxes, depreciation, and amortization) was lower at negative $12.58 million.

Any way you look at this, it’s a miserable performance. A Seeking Alpha author, Bashar Issa, agrees with this assessment and wrote that the company will not even be EBITDA positive until the company’s installed capacity is 50 MW, up from 32 MW today. Based on that the author ran a 20-year projection and projected that it would another 10 years before the company made any net profits.

The fact is hydrogen is simply not a profitable way to make electricity, at least at the present time. The core reason is that it is too capital-intensive compared to traditional electricity production methods.

What Analysts Say About FuelCell Energy

Analysts don’t agree with me. For example, the average of six analysts’ target prices, according to TipRanks.com, is $9, or 45% higher than Monday’s price at $6.14. Yahoo! Finance, which uses Refinitiv analyst survey data, says that seven analysts have an average price target of $8.89 per share, or 44.7% higher.

The problem is FuelCell Energy has a market capitalization of $1.98 billion but projected losses out to the year ending October 2024. Earlier in the year, FuelCell was able to raise equity capital and now has $156.5 million in cash and restricted cash in the bank. But with projected losses for the next four years, it is hard to know if that cash will last until then.

So, don’t rely on analysts to upgrade the stock any time soon.

What To Do With FCEL Stock

If you really believe in the company, maybe now is a time to begin average cost buying into a position. After all, you can honestly say that the stock seems to be at a trough. But you would have to know that each time a loss-making quarter comes out, FCEL is likely to move down again.

In fact, the company is so unprofitable and things look so dark now, maybe the most contrarian thing to do is to start buying. I respect that approach. Nevertheless, I think it is important to identify a catalyst that will eventually turn things around. Since the company is making negative gross margins, that is really hard to see right now. So, if you haven’t sold yet, maybe now is the time to bail out.

On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in any of the securities mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.