by Debra Fiakas CFA
Last week PowerSecure International (POWR: Nasdaq) announced the award of orders valued at $100 million for new solar projects. About 15% of the work will be completed in the final quarter of this year and the rest of the revenue will be recorded in 2016. The announcement sent investors into a tizzy. PowerSecure reported $283.4 million in total sales for the twelve months ending March 2015, primarily for solar power infrastructure and smart grid technology destined for electric utilities and microgrids.
Securing orders equivalent to 35% of its current revenue run rate is quite impressive, in my view, signaling that PowerSecure is capturing market share with U.S. electric utilities. As the solar power industry matures, transforming from early stage to established, becoming the ‘go-to’ source for successful solar project deployment is important. PowerSecure offers smart grid and demand response technologies that help set it’s solar power generation systems apart from the rest of the pack.
This was not the first time that PowerSecure had made an announcement of material orders. A year ago the company won a major contract award valued at $120 million for an electric utility. Since then new contracts have trickled in, but total have only come to about $30 million. If investors have been concerned that the large order in 2014, was to make PowerSecure a ‘one shot wonder,’ their worries are over. The most recent order helps cast PowerSecure as an established player in the solar project development market.
To add to the drama, the company’s announcement was made during the final trading day last week. Trading the stock was halted pending receipt of the news. On hearing the good news, investors immediately bid the stock higher and trading volume ramped to three times the recent average.
Analysts with published estimates for PowerSecure may have already anticipated the revenue. The consensus estimate for the year 2015, indicates analysts have a bullish view on the year with a total sales estimate of $386.7 million. This represents 36% growth over the recent revenue run rate up in the twelve months ending March 2015. Likewise, the consensus sales estimate for the year 2016, represents 17% growth over the estimate for 2015. Consequently, investors might not see the usual string of upward estimate revisions that often send investors off to place buy orders for stocks.
Nonetheless, the news is certainly bullish for PowerSecure. The company posted a net loss in 2014. The new order appears to be large enough to put the company back ‘into the black.’ That should be bullish for the stock price.
Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.
Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.