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.
week I spent the better part of a day listening to presentations of energy
companies at the Wall Street Analyst Forum in New York.Although I had heard the management of US Geothermal
the company’s story before, I was impressed to hear about the progress the company
has made in squeezing profits from electricity produced with turbines run by
underground steam. Management called it gratifying!
company reported $31 million in sales in the year 2014, delivering $14.9
million in net income to the bottom line.That is something to celebrate!
in 2014 grew 13.1% year-over-year compared to $27.4 million.Production profits also increases to 48.5% of
sales, up just a pinch from the year before when profits were 48.3%.Unfortunately operating expenses rose during the
year leaving profits at that level at $4.6 million or 14.8% of sales.What really drove net income in 2014 was a
$12.0 million tax benefit as the company amortized tax assets built up in
previous years when the company experienced losses.
is almost always the case with young companies, even ones that have achieved
profitability, it makes sense to look carefully as the company’s ability to
generate cash.As confusing as US
Geothermal’s profits and loss profile might be, its report of operating cash
flow is illuminating.In 2014, the
company’s operations generated $12.8 million in cash, which tops 2013 cash
generation of $10.6 million.
is exciting seeing cash in the bank and even more gratifying when management
finds something productive to do with it.US Geothermal has a history of buying up thermal assets.The company acquired new leases for its Vale
project, but the real excitement has been in two other acquisitions.
WGP Geysers Project Pipelines
2014, the company bought the WGP Geysers project from Ram Power for what appears
to be a very attractive price of $6.4 million.WGP Geysers is a developed site with four wells in the larger Geysers
project in California.A recent
engineering report suggests the project can generate 30 megawatts annually. The
company has received approval to build a 38.5 megawatt power plant.
in December 2014, US Geothermal issued stock to acquire Earth Power Resources,
which included geothermal assets in Nevada that could give rise to three power
projects.A third party has estimated
there is sufficient heat in place to generate 71 to 186 megawatts of power.The company began drilling the first
production well in December 2014.
company is projecting nearly 200 megawatts of power by 2020 from the current 45
megawatts.Management has told analysts
who follow the company that it can generate $100 million in EBITDA (earnings
before interest, depreciation and amortization).Against such a prognosis, HTM shares appear
investors are unconvinced.A review of
recent trading patterns found in a point and figure chart suggests a very
bearish sentiment prevails in trading of HTM shares.An investor taking a bull case position in the
stock may have some time to wait for appreciation of the shares.
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.