Forever is an awfully long time, but individual investors know the importance of maintaining a long-term mindset. While the stock market transitions through periods of expansion and contraction, investors capable of removing emotions from the decisions governing their portfolio have consistently enjoyed increases in wealth.
Of course, it’s important to buy and hold great businesses with solid long-term growth opportunities. That’s why I think…
Capitalizing on multiple renewable energy trends
Not that long ago, Wall Street pondered what would happen to SolarEdge Technologies as an increasing number of competitors started to take aim at its core market of power inverters for solar modules. As it turns out, competition has heated up, but the global market has so far expanded fast enough to comfortably accommodate multiple major players. That’s allowed the business to maintain its sizable market share and gross margin over 30%.
In fact, SolarEdge Technologies reported year-over-year revenue growth of over 29% in Q1 2019 at a gross margin of 31.7%. While the latter has indeed been pressured by competition, the business continues to generate healthy operating cash flow, which stood at $56.5 million during the most recent quarter.
Financial strength has prodded SolarEdge Technologies to diversify into an impressive number of clean-energy solutions beyond its legacy power optimizer products. In the past 18 months, the business has acquired its way into electric vehicle powertrain, electric vehicle charging, lithium-ion battery cell assembly, and energy storage markets. That’s led to a surge in R&D expenses recently, but management thinks the eventual payoff will be well worth it.
Despite consistently delivering solid growth and laying out an ambitious long-term strategy, the stock trades at an attractive valuation. The company is valued at a market cap of $2.7 billion, which puts shares at just 15 times future earnings and a PEG ratio of 0.8. It seems Wall Street is taking a wait-and-see approach to the diverse list of growth initiatives now under way, but investors willing to be…
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