Industry-leading manufacturer of specialty electrical transmission, distribution, and on-site power generation equipment, Pioneer Power Solutions, Inc. (PPSI), which is headquartered in Fort Lee, N.J., saw its shares skyrocket in price after it announced the launch of its electric vehicle charging solutions portfolio earlier this month.

PPSI’s stock price has gained 142.6% over the past month and 111.9% year-to-date. The company’s upbeat E-Bloc sales, with more than $1.8 million of equipment sold and delivered in the last reported quarter, and continued investments in new EV charging products, should help it drive continued operational and business improvement.

However, the company reported a wider loss in the third quarter of 2021. In addition, its weak cash balance could dent investor and analyst sentiment in the stock. Although PPSI’s accelerating sales momentum could bode well as the demand for high-capacity charging installation continues to rise, heavy competition in the EV space could limit its growth potential.

Click here to checkout our Electric Vehicle Industry Report for 2021

Here is what could influence PPSI’s performance in the coming months:

Launch of New EV Charging Solutions Portfolio

On November 8, PPSI introduced the E-Boost portfolio of mobile Electric Vehicle (EV) off-grid charging solutions for a whole range of applications. This launch marks the company’s strategic shift toward the budding EV charging market. The company’s CEO, Nathan Mazurek, said, “We are anticipating the rapidly growing demand for high-capacity mobile charging that will be required to support the wide range of EV and mobile power use cases with E-Boost products.” As EV adoption accelerates, PPSI’s new offerings are poised to capitalize on the market opportunity.

Unstable Financials

PPSI’s total revenue rose 40.3% year-over-year to $5.7 million in the third quarter ended September 30, 2021,  attributable primarily to an increase in its switchgear sales. But the company’s gross profit declined 3.5% from the prior-year period to $713,000, due to global supply chain disruptions. Its operating loss grew 14.9% year-over-year to $518,000 over this period. Furthermore, PPSI incurred a  $434,000 net loss for the quarter, compared to $1.3 million of net income in the prior-year period. The company’s cash stood at $3.4 million as of September 30, 2021, compared to $7.6 million of cash as of December 31, 2020.

The PPSI’s revenue and total assets declined at CAGRs of 36.4% and 34.7%, respectively, over the past three years.

Stretched Valuation

In terms of trailing-12-month EV/Sales, PPSI is currently trading at 3.37x, which is 57.5% higher than the 2.14x industry average. And its 3.86x trailing-12-month Price/Sales multiple is 135.6% higher than the 1.64x industry average. Also, the company’s 5.70x trailing-12-month Price/Book ratio  is 91.6% higher than the 2.98x  industry average.

POWR Ratings Reflect Uncertainty

PPSI has an overall C rating, which translates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PPSI has a D grade for Growth. The stock’s inadequate growth prospects are in sync with this grade.

Also,  the company has a Stability grade of D, indicating that the stock is more volatile than its peers. In terms of Value Grade, PPSI has a C. The stock’s higher-than-industry EV/Sales ratio is consistent with the grade.

In addition to the grades we have highlighted, one can check out additional PPSI ratings for Momentum, Quality, and Sentiment here. PPSI is ranked #67 of 92 stocks in the C-rated Industrial – Equipment industry.

Click here to check out our Industrial Sector Report for 2021

Bottom Line

A robust EV charging portfolio and accelerating growth of PPSI’s revolutionary suite of mobile EV charging solutions to serve the unmet need for mobile charging and high-capacity charging has contributed to significant improvement in its business. However, its weak balance sheet and stretched valuation could limit its growth in the near term. Therefore, we think investors should wait for its finances to stabilize before investing in the stock.

How Does Pioneer Power Solutions (PPSI) Stack Up Against its Peers?

While PPSI has an overall POWR Rating of C, one might want to consider taking a look at its industry peers, Applied Industrial Technologies, Inc. (AIT) and Finning International Inc. (FINGF), having an A (Strong Buy) rating.

Click here to checkout our Electric Vehicle Industry Report for 2021

PPSI shares rose $0.01 (+0.14%) in premarket trading Monday. Year-to-date, PPSI has gained 90.96%, versus a 26.64% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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