thyssenkrupp nucera's Green Hydrogen Promise Clashes with Financial Reality: A Cautionary Tale

The race to decarbonize energy systems has turned green hydrogen into one of the most hyped technologies of the 21st century. German engineering giant thyssenkrupp nucera KGaA (ETR:NCH2) is a key player in this space, leveraging its expertise in industrial infrastructure to build green hydrogen projects worldwide. Yet beneath the buzz lies a stark financial reality: the company's stock trades at a sky-high valuation, its returns on equity are dismal, and shareholders haven't seen a dividend in years. For investors, the question is clear: Is this a stock worth betting on for the green hydrogen revolution, or a cautionary tale of overvaluation in a sector still searching for profitability?

The Numbers Tell a Troubling Story

Let's start with the basics. As of early 2025, thyssenkrupp nucera's ROE (Return on Equity) for Q1 2025 stood at just 1.33%, a paltry figure that underscores the company's struggle to generate meaningful returns for shareholders. This is down from already weak historical levels—its ROE averaged around 3% over the past decade—and contrasts sharply with the 12-15% ROE typical of healthy industrial firms.

The root of this underperformance? A combination of heavy capital expenditures, thin margins, and project delays. The company's Q1 2025 net income was a loss of €4.4 million, with earnings per share (EPS) at €0.0717—a 20% decline from the same period in 2024. Meanwhile, its Price-to-Earnings (PE) ratio has skyrocketed to 1,447.51 on a trailing twelve-month basis, despite consistent EPS declines. This multiple—more than ten times higher than the 104 it sported in late 2024—suggests investors are pricing in a massive turnaround in profitability that hasn't materialized yet.

Dividends? Not for Years

The lack of dividends further underscores the risks. The last recorded dividend was €0.15 per share in fiscal year 2022/2023, and there's been no update since. For a company in a capital-intensive industry, this signals that management is prioritizing reinvestment over shareholder returns—a strategy that could backfire if projects don't deliver as expected.

The Green Hydrogen Opportunity—and the Hurdles

thyssenkrupp nucera's growth narrative is compelling on paper. Green hydrogen—produced using renewable energy—is critical to decarbonizing industries like steelmaking, shipping, and power generation. The company has secured high-profile projects, such as a 600 MW green hydrogen feasibility study in Europe and partnerships like the one with Hydrom in Oman. These initiatives align with global demand: the International Energy Agency estimates the green hydrogen market could grow to $2.5 trillion by 2050.

But there are execution risks. Scaling up production requires massive upfront costs, and the industry remains plagued by high capital expenditures and low utilization rates. Competitors like Siemens Energy and Air Liquide are also vying for market share, while regulatory frameworks and subsidy structures remain uncertain in many regions.

Valuation: A High-Wire Act

The stock's valuation is a bet on future earnings growth—specifically, a projected ROE rebound to 4.19% by 2027 and a turnaround in net income. But with the stock price at €9.56 as of June 2025 and trailing EPS of just €0.19, investors are paying over 50 times earnings for a company that's still losing money quarterly. Even if earnings improve, the current multiple leaves little room for error.

Investment Takeaway: Proceed with Caution

thyssenkrupp nucera's pivot to green hydrogen is strategic, but its financial metrics are a red flag. The high PE ratio implies investors are already pricing in a near-miraculous recovery in profitability—a scenario that hasn't materialized despite years of promises.

Historical performance, however, reveals an intriguing pattern: when buying ETR:NCH2 on its quarterly earnings announcement dates and holding for 20 trading days between 2020 and 2025, the stock averaged a 30.1% return. Yet this outperformance was influenced by broader market conditions, economic cycles, and sector-specific dynamics. While such short-term gains might tempt traders, they don't outweigh the company's long-term financial struggles.

Until the company demonstrates:
1. Consistent positive net income and rising ROE,
2. A dividend policy that rewards shareholders, and
3. Project execution that translates to revenue growth,

the stock remains a risky bet. For now, investors should avoid paying a premium for a stock that's more symbolic of green hydrogen's potential than a profitable stake in it.

The green hydrogen revolution is coming, but for thyssenkrupp nucera to thrive, it needs to deliver on its promises—not just in technology, but in the bottom line. Until then, this stock is a cautionary tale of overvaluation in an industry still waiting to find its stride.