Developer of WattUp, Energous Corporation (WATT), recently announced that its 900MHz 1W Active Energy Harvesting transmitter technology had received U.S. Federal Communications Commission (FCC) Part 15 grant of equipment authorization for wireless power transfer at any distance. This approval complements similar unlimited distance wireless charging authorization in Europe, announced in May 2021.

However, the stock has lost 8.4% over the past month and 50% over the past nine months to close yesterday’s trading session at $1.97. Also, it is currently trading 74.4% below its 52-week high of $7.69, which it hit on February 19, 2021. In addition, it is currently trading below its 50-day and 200-day moving averages of $2.13 and $2.57, respectively, indicating that it is in a downtrend.

Here’s what could shape WATT’s performance in the upcoming months:

Top Line Growth Doesn’t Translate into Bottom Line Improvement

For the second quarter ended June 30, 2021, WATT’s revenue increased 61.7% year-over-year to $184.96 million. However, the company’s total assets decreased 25% sequentially to $40.37 million. Its loss from operations came in at $11.02 million, up 34.1% year-over-year.

Poor Profitability

In terms of the trailing-12-month asset turnover ratio, WATT’s 0.01% is 98.2% lower than the industry average of 0.78%. Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA are negative compared to the industry averages of 12.74%, 6.54%, and 4.73%, respectively.

Unfavorable Analyst Estimates

Analysts expect WATT’s EPS to decrease 16.7% for the current quarter ending December 31, 2021. Also, the company’s EPS is expected to remain negative in the current quarter, current year, and next year.

Stretched Valuation

In terms of forward EV/S, WATT’s 59.77x is 2,887% higher than the industry average of 2x. Likewise, its forward P/S of 90.74x is 5,603.1% higher than the industry average of 1.59x.

POWR Ratings Reflect Bleak Prospects

WATT has an overall rating of F, which equates to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. WATT has a D grade for Value, in sync with its higher-than-industry valuation ratios.

WATT has a D grade for Quality, in sync with its lower-than-industry profitability ratios. In addition, the stock has an F grade for Stability, consistent with its beta of 3.36.

Moreover, the stock has a D grade for Growth and Sentiment, consistent with unfavorable analyst sentiment.

WATT is ranked #38 of 44 stocks in the Technology – Electronics industry. Click here to access WATT’s ratings for Momentum as well.

Bottom Line

WATT released disappointing earnings results in the second quarter. Moreover, analysts expect its EPS to remain negative in the upcoming quarter. Since the stock looks overvalued at the current price level, it is best avoided now.

How Does Energous (WATT) Stack Up Against its Peers?

While WATT has an overall POWR Rating of F, you might want to consider investing in the following Technology – Electronics stocks with an A (Strong Buy) rating: AstroNova, Inc. (ALOT), Universal Electronics Inc. (UEIC), and Brother Industries, Ltd. (BRTHY).

WATT shares were trading at $1.87 per share on Tuesday afternoon, down $0.10 (-5.08%). Year-to-date, WATT has gained 3.89%, versus a 23.18% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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