This is a continuation of my look into which companies in the Wise Energy Use index seem to have the financial strength to survive a prolonged slowdown. I generally liked the efficient lighting companies in the index, but wasn't thrilled by any of the electric vehicle picks. This article looks at the energy management and metering companies described here, many of which were also featured in my article on smart metering.
Many of these companies sell their products to utilities, not consumers, so their revenues should be less vulnerable to a drying up of consumer credit than most.
Itron, Inc. (ITRI). Metering company Itron has a lowish current ratio (.93), but positive operating and free cash flow. It also sells its products into the utility market, not to consumers, giving it a relatively stable revenue base in a downturn.
Echelon (ELON). Energy management company Echelon also sells into the utility market, has a strong current ratio over 5, and while operating cash flow is negative, it is less than 4% of cash on hand.
Woodward Governor (WGOV). Energy control company Woodward Governor sells into a wide variety of industry, aerospace, and energy companies. Some of these will be exposed to a slowing economy, but certainly not as much as consumers, and some are relatively stable (utilities and military). The company has a comfortable current ratio of 3.3, and positive cash from operations and levered free cash flow.
EnerNOC (ENOC). Demand Response company EnerNOC also sells into the relatively stable utility market. Although still losing money, their current ratio is a relatively comfortable 2.8 and they have four years of operating cash loss and two years of levered free cash loss in cash on hand.
Energy Recovery (NASD: ERII). Energy Recovery was a new company to me. According to Energy Tech Stocks, they provide "power to water desalination plants. Experts say Energy Recovery’s equipment provides significant cost savings over its competitors." Desalinization plants should be a relatively stable market, even in a downturn. The company has a solid current ratio of 3, but very little cash on hand; most of their current assets are in the form of accounts receivable and they have a small negative operating cash flow. Doing a little more digging, I see that these numbers are from before the company's well-timed July 8 IPO, so the balance sheet now looks much better than would be expected from the last quarterly report. I still need to do more digging, but Energy Recovery is going on my list of stocks for further research.
DISCLOSURE: Tom Konrad owns ITRI, ELON, WGOV, and ENOC.
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