Itron Set To Rise After Tough Past 6 Months

| About: Itron, Inc. (ITRI)

Itron (NASDAQ: ITRI) provides metering, data collection, and utility software services worldwide. Itron has been hit hard in the past 6 months, as many investors have been avoiding the stock due to concerns that its competitive position, particularly in automated-meter infrastructure, is insecure. Since February shares have fallen 46%, dropping from $60 to under $30. I think however we have seen the bottom, when shares hit $26.40 on October 4, 2011. I have been monitoring the stock ever since to make sure it didn’t fall even more and I have come to the conclusion that $30 has become a support level that shares won’t fall below again. While the stock’s past performance has been nothing to showcase I believe the potential is something we should showcase.

Itron has beaten consensus earnings expectations for four consecutive quarters. I expect this trend to continue as sales increase in both 2011 and 2012. In addition, I believe the company has many strong suits and growth opportunities, below are 10 reasons I believe ITRI will rise higher:

10 Reasons ITRI’s ready to succeed

  1. International business will gain traction and significantly grow in the next several years.
  2. Advanced Metering Infrastructure (AMI) will be a focus of ITRI’s as I believe there is huge room for potential new AMI contracts in Europe.
  3. Emerging markets expansion. ITRI is heavily focusing on expanding into the emerging markets, heavily focusing on India and Africa.
  4. Grow own businesses. ITRI is focused on expanding its gas and water businesses significantly.
  5. Backlogged contracts. ITRI currently holds upwards of $1.6 billion in backlogged contracts, something that will only help increase future earnings and lead Itron to beating consensus earnings for a fifth consecutive quarter.
  6. 16% total market share. While some investors have concerns about Itron’s competitive advantage, statistics show otherwise. Besides being profitable as a mid-cap stock in a large-cap game, Itron has still managed to capture 16% of the total market share, significantly higher than what many have thought.
  7. 60% discount compared with its peers, that’s what Itron is trading at as it holds a cash-flow multiple of 10.
  8. Multi-year low. Itron is trading an a 5-year low, which I believe points further in the right direction helping support my thoughts of $30 being a support level.
  9. 60% Buy Rating. Wall Street Analysts predict in 12-months the stock will be trading anywhere between $55-$95.
  10. Cash Flow. ITRI continues to focus on lowering debt. From 2010 to 2011, total debt for the company decreased from $782 million to $611 million while holding $541 million in cash. This improvement should give the company some financial flexibility if it chooses to aggressively expand through opportunistic acquisitions.

Final outlook for Itron

Overall I believe Itron is a solid investment and I recommend you buy the stock as I believe shares are attractively valued compared with historical numbers. (Still look at $30 as a strong support level for ITRI's shares). ITRI has strong business prospects, an improving balance sheet, improved efficiency leading to increased earnings, and growth opportunities in Emerging markets. Overall I believe ITRI shares will rise all the way to $65 per share in the next 12-months, for a total yield of 95%. A potential ten-bagger is what we have indeed.

Disclosure: I am long ITRI.