KeyStone’s Stock Talk Podcast Episode 126

This week, back by popular demand we put together another Case For, Case Against segment. In the line of fire is Ballard Power Systems Inc. (BLDP: TSX), which designs, develops, manufactures, and sells proton exchange membrane fuel cell products. Ballard’s zero-emission PEM fuel cells are enabling electrification of mobility, including buses, commercial trucks, trains, marine vessels, passenger cars and forklift trucks. We argue both sides of the BUY/SELL argument for the stock.  In our Your Stock, Our Take we take a listener question on Element Fleet Management Corp. (EFN: TSX), a global fleet management company, providing world-class services and financings for commercial vehicle and equipment fleets. We investigate how the business is holding up during the pandemic lockdown. Our Star of the Week is Mogo Inc. (MOGO: TSX), a Canadian based fintech company which offers a finance app that provides a number of solutions for managing and monitoring your financial health. The stock is up 30% over the past 5 trading days, we let you know why.

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The Case For & Against a Stock. This week, associate analyst Brennan will be providing the case for investing in Ballard Power Systems Inc. (BLDP: TSX) , and I will be apposing him with the case against slapping your hard earnings dollars down on this stock. Aaron will act as the judge, jury, and ultimate executioner to determine who wins the day.

Each participant will get one minute to position their argument. 

The Case for and Against:

Ballard Power Systems Inc. (BLDP: TSX)

Quick description: Ballard Power engages in the design, development, manufacture, sale, and service of proton exchange membrane fuel cell products. The company offers heavy duty modules, fuel cell stacks, backup power systems, and portable power/ unmanned aerial vehicles (UAV), and material handling products. It also provides technology solutions comprising engineering services and technology transfer services, as well as licenses and sells intellectual property portfolio and fundamental knowledge for various fuel cell applications. The company serves transit bus, automotive, rail, truck, material handling, UAV, marine, and critical infrastructure markets.

Ballard Energy (BLDP: TSX) 

Current Price: $28.22

Market Cap: $7.365 Billion

For Case:


  • The company’s core mission is to deliver fuel cells for a sustainable planet – which is on trend.
  • Revenue has been growing at a great pace, increasing 17% in the past 9 months over the same 9 months for 2019. All while COVID-19 has had a significant impact on the business.
  • The company announced a 6x expansion of its manufacturing capacity of Membrane Electrode assembly’s which are key to building fuel cells. This will be completed in early 2021. 
  • They have a great balance sheet with no debt, and a current ratio of 9x so the company is currently very liquid. 
  • China represents a great opportunity as the government is trying to address air quality issues. And Ballard has a key Joint Venture with Weichai, one of Chinas largest public companies who develops diesel engines.
  • Ballard has signed a Technology Development Agreement and Patent Licence Agreement with Audi (the car manufacturer) to develop its FCgen PEM fuel cell stack, to help drive Audi cars.


Case Against

    1. Poor track record – Founded in 1979, Ballard has always had “promising technology”. But, in its 40+ years, the company has not produced a cent of cash flow and accumulated a shareholder deficit of $1.26 billion, with no end in sight. 
    2. No profitability – with negative free cash flow of $20.2 million in the latest quarter and a 12-month order backlog down 20% sequentially, estimates for 2021 appear high. Given COVID related delays and a potential scaling back of the company’s agreement with Audio, sales could drop in Fiscal 2021. 


  • High Valuations: The company has a $7.36 Billion market cap with less than $100 million in sales, trades at 40+ times those sales, with expectations of continued losses.  There are simply better options out there to play renewable energy with less risk and strong track records.
  • High valuations, zero cash flow, a poor track record, and significant competition in the green power market – despite blue sky potential, Ballard appears overvalued near-term.


Win: Ryan


Your Stock Our Take

Lorne via Email


What does the company do?

Element Fleet Management Corp. (EFN: TSX)

Current Price: $13.07

Market Cap: $5.66 Billion

Forward Yield: ~2%

What does the company do?

Element is a leading global fleet management company, providing world-class services and financings for commercial vehicle and equipment fleets, including a comprehensive range of fleet services that span the total lifecycle, from vehicle acquisition and financing to program management and remarketing.

Key Points: 

Element’s collections and credit performance in the quarter saw a return to pre COVID-19-levels and, in some cases, improved on those levels. So, since financing vehicle fleets is a large portion of the business its great to see that delinquencies are not trending in the wrong direction.  

The company has put in place a series of transformational efforts over the past 25 months to increase operational efficiency. Which the company stated delivered $35 million of profit improvement in Q3, 2020 and that the company made an additional $24 million of one-time investments this quarter to continue this transformational process into year end.  

They did provide some targets for 2021 to aggressively pursue organic growth by magnifying 4-6% annual organic revenue growth into high single-digit to low double-digit annual operating income growth.

And finally, it recently increased its common dividend 44%, from $0.18 to $0.26 annually per share, equating a payout ratio of approximately 30% of the company’s last twelve months’ adjusted earnings per share.

Recent Financial Results: (Q3, 2020)

  • Revenue was down slightly to $243 million from approximately $246 million in Q3, 2019. 
  • GAAP Net Income per share for the quarter was flat at $0.14 compared to the same quarter last year.
  • FFO per share was down slightly to $0.49 from $0.51 per share from the same quarter last year.
  • TTM FFO was $991 million providing the company with an EV/FFO multiple of ~17x. Which I believe is near fair value, but possibly reasonable if the company can achieve their target of high single to low double digit annual operating income growth in 2021. 
  • Looking at the balance sheet they have a net debt position of $10.3 billion and a net debt-to-FFO multiple of 13x. This appears high but it’s important to note that the company does have total earning assets of 10.8 billion in net earning assets, which are defined as net investment in finance receivables, total carrying value of equipment under operating leases and carrying value of other earning assets. Although these assets are not very liquid and are subject to credit risk, funds could be generated to help payoff debt. And on a good note, its TTM interest coverage ratio is 2.3x, so it can certainly service its debt at this time. 


Element Fleet Management appears to be making a nice rebound out of Covid and I believe there will be sufficient growth opportunities for fleet management. As internet shopping and delivery services continue to grow and companies will of course need to service and update old vehicle fleets as they become out-dated. So, on a macro side of things, I like where they are positioned. Now looking at the business itself, it has a healthy payout ratio a slight yield and I like that the company is working on optimizing its operational efficiency through its transformational program. Plus, it is great to see that the company is prioritizing organic growth in 2021 with a high single digit to low mid digit operating income growth target. If these growth targets are met, the stock could potentially offer some value at its current price, but with it trading near 17x EV/FFO, I believe that the stock is trading near fair value. 

Ryan Comments

Even at the high-end range of its operating income anticipated growth or low single digit growth, it appears fairly valued given it trades at 14-15 times earnings. We still see some potential risk as COVID related business subsidies are scaled back as they will have to be overtime. 

Weekly Star


Mogo Inc. (MOGO: TSX)

Current Price: $3.14

Market Cap: $95 Million

What does the company do?

Mogo Inc is a Canadian based financial technology, or fintech, company. Mogo offers a finance app that provides a number of solutions for managing and monitoring financial health. These solutions include a digital spending account with Mogo Visa* Platinum Prepaid Card featuring automatic carbon offsetting, free monthly credit score monitoring, ID fraud protection and personal loans.

Key Points: 

We actually had Mogo on as a Dog in late August. The company had just reported its first quarter of positive operating income, but weakness in other areas of the financial performance, resulted in an 18% decline in the share price. 

Now it seems that Mogo’s fortunes may have reversed as the company is up 30% over the past 5 trading days and up 36% since we featured the stock as a weekly Dog in August. 

Its actually been a very wide ride for Mogo since August and the company was as low as $1.65 just earlier this month and shortly before the release of its Q3 report. 

Financial Performance:

The Q3 reports was released on November 10th.

  • Total revenue was $9.8 million, which was down 35% year-over-year, but slightly above the company’s guidance. 
  • Subscription and services revenues was down 30% to $4.2 million in the quarter.
  • Cash flow from operations was $5.2 million in the quarter compared to a loss of $5.1 million last year. 
  • Adjusted earnings was reported at $3.4 million compared to a loss of $5.2 million last year. 
  • The company also reported that Members increased 16% year over year to 1,074,000 at quarter end, driven partly by the launch of free ID fraud protection.
  • Launched a new automatic carbon offsetting feature with the Mogo Visa* Platinum Prepaid Card (“MogoCard”), designed to help Canadians improve their financial health and the health of the planet through better spending control and automatic carbon offsetting.


This is Mogo’s second consecutive quarter of positive operating income. A great sign and it does appear that the company may be transitioning into sustainable profitability. 

We are not particularly comfortable with the revenue decline. I would focus more on subscription revenue than total revenue but this was down significantly as well during the quarter. 

On a valuation basis, price to adjusted earnings or price to cash flow, Mogo is starting to look cheap. That’s assuming that the company can sustain its current level of profitability. 

One thing we discussed last time about Mogo is that it is somewhat comprised of 2 different businesses. There is the financial technology, or fintech side, and this is how the company markets itself to investors. But Mogo is also a consumer finance, or lending company, with the majority of its revenue still coming from interest income. These are really two different businesses. Successful fintech companies should garner higher valuations than pure finance companies (assuming the financial performance is strong). 

Mogo continues to be on our watch list. We will be watching the subscription revenue and if the company can start to grow this segment of the business then our interest in the stock would increase. 

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