Powering Up Your Portfolio
Damon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There is an old saying that “knowledge is power.” If that is true, then knowledge of power companies should help to power up your investment portfolio. Some power is generated and some is stored. Here is a sampling of stocks that store power in the form of batteries that might be worth a closer look if you are a long-term investor, or even a short term trader.
EnerSys (NYSE: ENS) manufactures and distributes reserve power and motive power batteries, chargers, power equipment, and battery accessories to customers worldwide. Motive power batteries are utilized in electric fork trucks and other commercial electric powered vehicles. Reserve power batteries are used in the telecommunications and utility industries, uninterruptible power supplies, and numerous applications requiring standby power. The company also provides aftermarket and customer support services to its customers from over 100 countries through its sales and manufacturing locations around the world. EnerSys was founded in 1999 with headquarters in Reading, PA and has more than 8,000 employees.
EnerSys reported Q3 fy2012 (quarter ending Jan. 1, 2012) earnings after market close on Feb. 8 and the report included a 12% increase in sales from the prior year‘s quarter. Adjusted net earnings per diluted share for the third quarter of fiscal 2012, on a non-GAAP basis was $0.80 compared to the prior year third quarter adjusted net earnings of $0.71 per diluted share.
In August 2011 the company’s Board of Directors authorized a share repurchase plan of up to $50M in common stock when the price was near its 52-week low, which in hindsight appears to have been a smart move. In December EnerSys opened a new production facility in China that is anticipated to generate $150 million in revenue annually when fully operational. With increased Q4 guidance and a price/sales ratio of 0.68 this stock is charged and ready to go.
Exide Technologies (NASDAQ: XIDE) engages in the production and sale of lead-acid batteries for transportation and industrial applications. It offers transportation batteries, which include ignition and lighting batteries for cars, trucks, off-road vehicles, agricultural and construction vehicles, motorcycles, recreational vehicles, marine, and other applications, such as micro-hybrids and lead-acid batteries used on full electrical vehicles. The company operates in the United States, France, Germany, Italy, Spain, and Poland. Exide Technologies has more than 10,000 employees and was founded in 1888 with headquarters in Milton, Georgia.
At $4/share XIDE is trading more than 65% below its 12-month high. Perhaps their narrow operating margin of 4% has contributed to the lackluster performance over the past several months. Competitors like EnerSys have also been taking market share away from Exide in some segments.
On the other hand, the stock is trading at less than book value and at a 0.1% price/sales ratio there is potential for significant growth in the share price, especially as auto sales increase with the improving economy. But the company needs to substantially improve cash flows and reduce debt if they expect to be a powerhouse for investors. The next earnings report for XIDE is February 10 and that will be an opportune time to determine whether the stock is energized or if you should pull the plug.
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