Orion Energy Systems (OESX) — our latest stock of the month — provides state-of-the-art LED lighting, wireless Internet of Things enabled control solutions and energy project management, explains low-priced stock specialist Faris Sleem, editor of The Bowser Report.
The company has developed a portfolio of 104 U.S. patents covering various elements of its products, as well as 15 patents pending that primarily cover the newly developed LED products and certain business methods.
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Over the past few years, it’s even been utilizing its system platform as a “smart ceiling,” which can be integrated with other technologies. The demand for these systems has recently grown and is expected to trend higher over the coming years.
OESX’s other competitive advantage comes from the company’s ability to reduce lighting-related electricity costs by approximately 50% or more.
At a glance, Orion Energy Systems may seem like a risky investment because share price has jumped over the past seven months. However, it’s still showing signs of long-term sustainable growth. In recent quarters, the company has had some of its larger contracts impact financial results.
Revenue grew 266% from the prior year period and management maintained its FY20 revenue goal range of $135-$145 million. Orion achieved record quarterly net income of $6.7 million and EBITDA rose to $7.3 million compared to a loss of $1.8 million in Q2FY19.
Both insiders and institutional investors own a large number of OESX shares. There have been twelve insider transactions over three months, with 259,468 shares being either acquired or purchased. Some of the largest insider shareholders purchased shares between $2.78-$2.87 which is reassuring of growth prospects.
The main risk associated with OESX is its current price per share. The stock has risen tremendously over the past year, but it is a growth investment, not one based on value. If top line growth and industry outlook maintain, then it is unlikely to stay below $3 for very long.
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OESX has reported outstanding numbers over the past two quarters and management seems confident in a strong close to the year. Its improving balance sheet, strong cash flow and additions to its sales team are reassuring that the company is in on the right track to maintain growth.
With demand for LED lighting growing at a rapid rate, OESX has the competitive edge to capture more market share in the long run.
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