Is Investing in Pioneer Power Solutions a good idea?

Pioneer Power Solutions, Corporation (PPSI – Get Rating), an industry-leading maker of specialty electrical distribution, transmission, and on-site power production equipment based in Fort Lee, N.J., saw its stock soar after announcing the inauguration of its electric car charging solutions portfolio during the start of this month.

The stock price of PPSI has risen 142.6 percent in the last month and is up 111.9 percent year to date. The company’s positive E-Bloc sales, which totaled more than $1.8 million in equipment sold and supplied in the most recent reported quarter, as well as continuous investments in new EV charging solutions, should help it promote continued business and operational improvement.

In the 3rd quarter of 2021, however, the corporation recorded a larger loss. Furthermore, the company’s low cash position could hurt investor and analyst confidence in the stock. Although PPSI’s increasing sales momentum may auger well as demand for the high-capacity charging installations grows, the EV space’s fierce competition may limit the company’s development potential.

New Electric Vehicle Charging Solutions Portfolio Launched

PPSI unveiled the E-Boost range of the mobile Electric Vehicle off-grid charging options for a wide range of purposes on November 8. The company’s strategic pivot toward the nascent EV charging sector is marked by this launch. “We are anticipating the fast-expanding demand for the high-capacity mobile charging which will be needed to support the wide spectrum of EV as well as mobile power use cases utilizing E-Boost products,” said Nathan Mazurek, the company’s CEO. PPSI’s new services are set to leverage the market opportunity as EV usage accelerates.

In the 3rd quarter concluded September 30, 2021, PPSI’s overall revenue increased 40.3 percent year over year to $5.7 million, owing mostly to an increase in switchgear sales. However, due to worldwide supply chain delays, the company’s gross profit fell 3.5 percent to $713,000 from the previous year. During this time, the company’s operating loss increased by 14.9 percent to $518,000 over the same period.  In addition, PPSI had a net loss of $434,000 for the quarter, contrasted to a net profit of $1.3 million the year before. As of September 30, 2021, the company had $3.4 million in cash, contrasted to $7.6 million as of 31st December 2020.

Over the last three years, the PPSI’s revenue and total assets have fallen at CAGRs of 36.4 percent and 34.7 percent, respectively.

Stretched Valuation

PPSI is presently trading at 3.37x trailing-12-month EV/Sales, which is 57.5 percent more than the 2.14x market average. Its trailing-12-month Price/Sales multiple of 3.86x is 135.6 percent higher than the industry average of 1.64x. In addition, the company’s trailing-12-month Price/Book ratio of 5.70x is 91.6 percent higher than the industry average of 2.98x.

 

PPSI has a C overall grade, which in the system translates to Neutral. The POWR Ratings are produced by taking into account 118 different parameters, each of which is weighted to the maximum extent possible.

How Does the PPSI Compare to the Competition?

While PPSI has a POWR Rating of C, the sector peers Applied Industrial Technologies, Corporation (AIT – Get Rating) as well as Finning International Corporation (FINGF – Get Rating), both of which have an A (Strong Buy) rating, maybe worth considering.

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