ECOtality (NASDAQ:ECTY) is a company that is one of the leading providers of electric transportation technologies and infrastructure. Blink, Minit-Charger, ETEC LABS are the three business segments of the company. The Blink segment provides residential, public, and commercial EV charging solutions and Blink has over 11,000 chargers as of February 2013. Minit-Charger provides fast charging electric material handling and ground support equipment. ETEC LABS provides 20+ years of consulting and R&D for advanced transportations systems, fueling infrastructure, energy storage and vehicle technologies and the segment has been awarded $26.4 million by the U.S. Department of Energy for advanced vehicle testing.
State of The Electric Vehicle Market
The current state of the electric vehicle market could indicate how well ECOtality will perform in the future. The news from the electric vehicle (NYSE:EV) market has been very upbeat lately. The fleet of plug-in electric vehicles in the United States is the largest in the world. Since 2008, more than 90,000 highway-capable plug-in electric cars have been sold in the United States. Annual sales of plug-in electric vehicles are projected to reach 360,000 vehicles by 2017. The Nissan (OTCPK:NSANY) Leaf currently leads the EV market with 2,236 vehicles being sold in March of 2013. Tesla (NASDAQ:TSLA) sold 4,900 EVs and the company reported its first quarterly profit in the first quarter of 2013. In addition, several major car companies are planning to launch new plug-in EVs in 2014. Some of these new vehicles include the 2014 BMW i3 and the 2014 Chevrolet Spark. The plug-in EV market has enormous potential at this point.
ECOtality's fundamentals have improved greatly recently. The company's revenues recently hit an all time high of $54.73 million. Although still negative, the company's EPS of -.41 is its highest EPS in 5 years. The company has $60.8 million in total assets and $45.1 million in total liabilities. The stock's P/B of 3.58 is lower than the industry average P/B ratio. ECOtality has a free cash flow of $4.58 million and the free cash flow is at its highest level in 5 years. The P/S is at .89, which is another positive indicator.
The company announced in their Q1 2013 earnings conference call that the company generated record revenue in Q1. In addition, the company grew the size of the Blink network by nearly 20%. CEO H. Ravi Brar announced that the company turned its attention to further monetizing its Minit-Charger ETEC LABS product offerings. In 2009, ECOtality was awarded $99.8 million by the U.S. Department of Energy to develop the EV project. The goal of the EV project is to grow the charge infrastructure in the U.S. The company said that the project has provided ECOtality a solid foundation to build upon. The company took numerous steps to leverage and expand its network, which puts the company in a good position to benefit from the increased usage of EVs. The company's revenue grew by 16% in Q1. Approximately 77% of the company's Q1 revenue was attributed to the work performed under the EV project. Gross margin was flat at 37% compared to same period last year. Many of the company's expenses were also unchanged from Q1 2012 to Q1 2013. The company believes that more of its revenue will become sources other than the EV project during the second half of the year. In Q1, it was also announced that Kroger (NYSE:KR) would be using Blink charging stations at some of its stores. In addition, Texas Instruments (NYSE:TXN) announced during Q1 that it would be installing Blink charging stations at 12 office locations in Texas.
The potential rewards with this stock are high but so are the risks. ECOtality is extremely volatile and the stock regularly swings by large percentage points. The 52-week range for this stock is .26 and 2.40. Investors who have low tolerance for risk and volatility should avoid this stock. The main concern that many investors have about ECOtality is that a large amount of its revenue is from the EV project. The EV project is something that ECOtality plans to conclude by the end of the year. 77% of the company's income in Q1 came from this project. If the company is to continue to do well then it must derive more of its revenue from other sources. ECOtality has stated that the EV project laid the foundations for future growth.
ECOtality derives its revenue from diversified sources and the stock is a buy because of its long-term potential. Electric vehicles will become more common in the near future and ECOtality is well positioned to benefit from an increase in the usage of electric vehicles. In April, Vista Partners initiated coverage of ECOtality and they gave the stock a $3.70 dollar price target. The industry is projected to have a compound annual growth rate of 37.4% between 2012 and 2020. ECOtality will surely be able to capture this growth.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.