The world has to rapidly transition towards clean energy solutions in the upcoming decade given that climate-change warnings have intensified in recent years. Global economies will be pumping in trillions of dollars to set up a robust infrastructure allowing renewable energy companies to thrive and expand over the long term. Given this sector is poised to benefit from multiple secular tailwinds, here's why FuelCell Energy (NASDAQ: FCEL) is a renewable energy stock I'm buying today.

A look at FuelCell's financials

FuelCell is valued at a market cap of $2.77 billion and the company designs, manufactures, installs, and services fuel cell power plants for baseload power generation. It recently disclosed fiscal Q3 results of 2021 (ending in July) and reported revenue of $26.8 million which was 43% higher than its prior-year period. A key driver of its stellar growth was an increase in FuelCell's services agreements and license revenue which rose by $7.2 million.

The company's loss per share of $0.04 in Q3 was narrower than its year-ago loss of $0.07 per share and better than consensus estimates of a loss of $0.05 per share. But, FuelCell's sales have fallen from $95.66 million in fiscal 2017 to $70.87 million in 2020. Now, Wall Street expects sales to grow by 8.5% to $77 million in 2021 and by 57% to $120.5 million in 2022. This expansion in revenue should allow the company to narrow its losses from $0.42 per share in 2020 to $0.14 per share in 2022.

What I like about FuelCell

While FuelCell's sales were up 43% in Q3, its gross profit surged to $1.1 million, compared to a loss of $3.12 million in the prior-year period. A significant improvement in gross margins should allow the company to expand earnings as the company will benefit from economies of scale over time.

Investors remain bullish on companies operating in the fuel cell vertical as these products can generate electricity with low carbon emissions. They also have industry-wide applications as FuelCell's customers include universities, healthcare facilities, industrial and other commercial businesses. FuelCell sells the power it generates via long-term purchase agreements as well as upfront and is ideally positioned to take advantage of the enterprise-level shift towards clean power sources.

Risks to FuelCell's share price

FCEL stock is valued at a forward price to 2022 sales multiple of 22.1x, which is sky-high. It ended Q3 with a backlog of $1.3 billion, a decline of 2.25% year over year. It shows us FuelCell could not secure any big-ticket contracts in recent months which exacerbates the risks associated with a loss-making company that is significantly overvalued.

Further, FuelCell ended Q3 with a cash balance of $469 million and suggests the company will have to raise additional capital, resulting in shareholder dilution in upcoming months.

FuelCell's growth potential

FuelCell is bound to improve its profit margins as product costs should normalize on the back of rising investments in clean energy verticals. FCEL stock is already down 75% from its 52-week high making it a top contrarian bet for those with a considerable risk appetite.

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