by Debra Fiakas CFA
It is the season of lights. Lights for Hanukkah. Lights for Christmas. Energy Focus (EFOI: Nasdaq) has been having a season of lights all year. The company reported $62.3 million in total sales of its LED lighting products in the most recently reported twelve months. Customers included large business and industry, property owners and the military. The oil and gas industry is an important market vertical.
Energy Focus really shines for the U.S. Navy with its explosion proof LED globes in all the colors the Navy needs to provide military personnel safety warnings. The Navy also buys special LED lights for the berths on its ships.
The company has been in the lighting business for over thirty years. Energy Focus has successfully made the transition to new more environmentally friendly technologies such as LED by investing consistently in research and development. Research and development expenses represent about 5% of total sales.
Sales provided $6.2 million in net income or $0.66 in earnings per share in the last reported twelve months. The stock is currently trading at about 14 times trailing earnings. Although small, Energy Focus has cultivated a following of analysts who have published relatively bullish views on the stock. The consensus estimate for 2016 is $1.02 in earnings per share on $87.9 million in total sales. That represents about 12% growth in earnings, suggesting the stock is trading at a bit of premium to growth projected for the next year. That might still be a bargain given the long-term opportunities in LED lighting, especially for a company with standout products and strong customer relationships.
Energy Focus is well capitalized, with very little debt. Consistent generation of operating cash flow has helped build cash on the balance sheet to nearly $35.0 million. Fast growing market opportunity, strong and loyal customers, profits, cash flow, low-leverage balance sheet. EFOI is truly a bright and shiny light!
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.