Power-One (PWER) – Momentum Could Continue – Targeting 30% Upside
August 13, 2010 10:18 am
Direct from the source:
Power-One is one of the world’s ten largest providers of power conversion and management solutions, and offers a diversified array of energy-saving “green” products:
- Alternative-Energy inverters facilitate harvesting clean power from the sun and wind.
- AC-DC products refine AC, such as wall outlet electricity, into the DC lower voltages needed within all systems that utilize electronic components.
- DC-DC converters convert a DC voltage into another value required by a circuit board or semiconductor.
- Intelligent Controls manage energy use in residential, utility, and industrial applications.
- Network Power Systems facilitate high-availability power for telecom landline and wireless systems.
- Power-One’s high-efficiency products save energy by providing more usable output power and generating less waste heat; which saves additional energy by reducing host-system and facility-level cooling requirements.
We have been fans of green-wise energy ideas for a while. Some have done well, and others have not. But, with all that is going on around the world with regard to the perceived global warming problem, those companies that are first to market with superior products and services should make out very well.
If we were to look at one of the concerning areas for Power-One, it would be the high level of income that comes from the EuroZone. Upwards of 30% of annual revenue has been coming from this region and any significant slowdown without making up for it from areas such as South America and/or Asia could create a shortfall as compared to estimates.
Otherwise, the current consensus price target is approaching $14.25, implying a 30% upside opportunity. While we are seeing that the one-year growth rate of EPS is -270%, that is looking at the latest actual numbers. Estimates for the future are showing a signifiant increase on a year over year basis for EPS:
- 2009-2010 : +700%
- 2010-2011: +50%
There is a good deal of volume pressure that shows that buying interest is strong. Debt is inline at 64% to equity, though we prefer a debt-free balance sheet.
More importantly is that sponsorship is growing again. Over the past month, three (3) additional mutual funds have picked up shares and as we all know, institutional support is one of the most important aspects of a momemtum move.
Below is our “OneSheet” that will provide additional data on this name. We see a potential opportunity from buying this name at this price level and on dips. Note that we have a high rating on the fundamentals and a very low mark for the technicals. This shows that it holds potential and that a smart price-point entry has the potential to become a lucrative trade.