Rewind to March 2009. The stock market was deep in the midst of sheer panic. The US economy was in shambles. The Dow was near the 6600 level and Fuel Systems Solutions (FSYS) stock was bopping around the $14 mark. Now fast forward to present day. The US economy is semi-whole again. The Dow has more than doubled, Fuel Systems Solutions has completed another four years of profitable operations, earning a cumulative total of $119 million. Believe it or not, those shares are still cheaper today, than they were four years ago.
In addition, no cash dividends were paid or stock buy backs implemented. In fact, the company actually raised $90 million by issuing 1.5 million shares in a secondary offering for $20 per share, followed up by the issuance of an additional 2 million more shares at $30 per each. Shares outstanding have increased 27% from 15.78 million to 20.04 million. Shareholders equity has risen from $154 million to $330 million. The company has no debt, $70 million in cash and sells at a 20% discount to book value.
Where is Mr. Market when you need him? In FSYS's case, his slumber, sticks out like a sore thumb. Maybe we will experience a "Rip Van Winkle" moment when FSYS reports its fourth quarter earnings next week - waking him up after a four year hibernation.
Don't get me wrong, there were times that some very nimble traders could have finagled some outrageous profits trading the name. In the past forty eight months, FSYS has experienced three powerful rallies. The first, running the shares up 500% (only to subsequently give all those gains back), followed by two more ascents of 60% and 80%. Unfortunately, the "buy and hold" type of investor was left holding the bag.
It is simply mind blowing to comprehend: Although its Shareholders equity more than doubled, its stock price actually fell in one of the greatest bull markets in our history - that is simply preposterous! What good is it if a company makes money, but none of those earnings translates into an increased share price or cash dividends? It can't be blamed on the space. Other alternative energy suppliers, such as Westport Innovations (WPRT) and Clean Energy (CLNE) saw their shares triple and quintuple respectively in the same period, yet they each continually lost money. WPRT sells at four times book value and has a net cash position of $213 million, while CLNE is priced at two times book, but has a negative cash position of $160 million, when factoring in its debt.
Is there a reasonable explanation for the disconnect? Why has this stock been so severely punished, while WPRT and CLNE have been rewarded for losing money? I have no clue, other than the other names are showing robust top line growth, which FSYS has been unable to accomplish. One thing for sure, this stock is eerily reminiscent of the supermarket chain Winn-Dixie (WINN), which I wrote a similar piece about, just before it was acquired for a 60% premium. Maybe, that's why I like history so much, because it tends to repeat itself. Repetitive history converging with the stock market, is a sure recipe for hitting the jackpot.
The fact that FSYS shareholders have seen so much injustice and punishment could present a proverbial "light at the end of the tunnel" opportunity. There should be no argument that its very inefficient price creates an opening for those to pounce on and exploit. The writing is on the wall, something has to give - $119 million of earnings simply does not vanish into thin air. Sooner rather than later, Mr. Market's oblivion to FSYS will end, and it will be priced accordingly.
Disclosure: I am long FSYS.
Additional disclosure: title has been changed and paragraphs have been adjusted to reflect