Tuesday, June 17, 2008

Bright Lights

One more idea along the energy savings investment theme….

Orion Energy Systems, Inc. (OESX: Nasdaq) is a developer of lighting solutions for commercial and industrial customers. The Company energy management systems include high intensity fluorescent lighting fixtures (HIF) that cut electricity costs by 50%. The products also improve the quality of lighting by 50%. Orion has dubbed this exceptional performance of their products the “50/50 Value Proposition.” In addition to the HIF products the Company offers the Apollo Light Pipe, which collects and focuses daylight without electricity.

Orion products are now installed in over 3,600 facilities. Customers include General Electric, Kraft Foods, Newell Rubbermaid, Office Max, SYSCO and Toyota Motor Company.

The installed base is only the “tip of the ice berg” in terms of total market opportunity. Lighting accounts for 22% of electric power consumption in the U.S., of which 65% is for commercial and industrial use. In 2003, an estimated 45,000 building still used inefficient, power-hungry incandescent lighting.

Orion markets its products based on the “50/50 value proposition” as well as a rapid payback period of two to three years. Utility incentives would shorten the payback period. Many utilities offer rate reductions or rebates to customers using energy saving devices that lead to relief in base and peak loads. Environmental benefits and easy installation and maintenance are also strong selling points.

The Company’s success in winning new customers is apparent in its top-line performance. Sales grew 67.4% to $80.7 million in the fiscal year ending March 2008 compared to the previous year. Net profits increased to $3.4 million or $0.22 per share, representing a net margin of 4.2%.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. OESX was first profiled with generally favorable commentary in the June 2008 issue of Small Cap SEARCH newsletter published by Crystal Equity Research.

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