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.
Yesterday Orion Energy
issued a press release to
reiterate previous guidance for sales in the quarter ending
March 2015.Given that the quarter has
already ended, it is more like a pre-announcement of results than
guidance.At any rate management has
indicated the results, when finally reported will bring sales for the fiscal
year ending March 2015, to some point in a range of $72 million to $74 million.
The announcement might not be so much motivated by a need to
assure shareholders of financial performance, as much as it created another
opportunity to drill home points about the company’s evolving business
model.Orion Energy Systems used to be
described as a power technology company.Today management skips all the high brow language about technology and points
directly to the only technology it has been able to turn into a product.So now management is describing Orion as a “producer
of energy-efficient LED lighting for residential and commercial applications.”
Retrofit with Orion LED Fixture
The press release might have been regarded as a bit
redundant given that Orion management has had plenty of opportunities to give
its pitch to investors during the company’s recent road show.In late February 2015, Orion raised $19.1
million by selling 5.5 million shares of its common stock at $3.50 per share.
It is relatively easy to undertake due diligence on Orion and
its market opportunity .Test out a few
LED lights on your own.Most hardware
stores have a selection on display.Statistica offers a few details on the
market for LED lights, suggesting LED now accounts for a 53% share.Manufacturing efficiency is expected to lead
to selling price reductions, helping to drive market share to over 60% within
the next five years.
Orion Energy Systems is operating in a strong market, but
its stock has gone through a period of trading weakness beginning right about
the time management began that road show period.The stock was left looking quite oversold
until the offering closed.Indeed, while
management was out pounding the pavement with its efficient-lighting story, the
stock registered a particularly bearish formation in a point and figure chart
called a ‘double bottom breakdown.’Yes,
that technical indicator is just as scary as it sounds and this one suggested
the stock had developed such a negative momentum it could drop to zero.
Now it appears OESX has begun a recovery.Still it is possible to buy a growing company
at a compelling price-even more compelling than the price paid by
an entire group of investors who heard the company’s ‘lighting’ pitch first
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.