Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
power producers have many challenges.One is the direct current to alternating current dilemma.Solar panels create power that flows one way
in a direct current (DC).We use
electricity in our homes and businesses in alternating current (AC) that flows
both directions, forward and backward.So solar cell producers must use solar
inverters that convert the electricity from the direct current in the solar panel
into alternating current.
is where Advanced Energy Industries, Inc. (AEIS:Nasdaq) comes in. AEIS
makes power inverters for the solar power industry.The inverters transform the power in the
solar arrays into a reliable electrical power. Sales to solar distributors and engineering
firms involved in building solar power plants represented 43.5% of total revenue
in the first half of 2012, a significant increase from a 36.4% share in 2011
and 23% in 2010.
rest of Advanced Energy’s sales are to the semiconductor industry.The AEIC power conversion products can be
used in a thin-film deposition fabricator to control the raw electrical power that
comes in from a utility. Put simply, the power flow can be customized and made
more predictable for the highly sensitive deposition process.
to the chip makers slipped in 2011 and again in the first half of 2012.Fortunately, there appears to be momentum in
the solar power industry that has power producers knocking on Advanced Energy’s
door.Analysts following Advanced Energy
have projected 15% annual growth in sales and earnings over the next five
those analysts are right in their collective wisdom, investors could be
justified in paying as much as 15 times earnings for AEIS - Price Earnings to Growth Rate is 1.00.Giving the professionals a full vote of
confidence, we can use their average projected earnings estimate for fiscal
year 2013-$1.12 per share.That yields a target price of $16.80 per
share and implies a current value of $14.60.That is not much higher than the current share price of $13.78 (9-18-12).Surprisingly, the mean target price among that
group of analysts is a bit lower at $13.70.
After all this math, it
is hard to get enthusiastic about Advanced Energy from a valuation standpoint.The stock chart is even more dissuasive.AEIS is trading very near its 52-week
high.The 50-day average price is
dropping day by day and appears poised to fall below the average price over 200
days.It seems prudent to wait for
better days to take a long position in AEIS.
Neither the author
of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies