Seeking Alpha

Dustin Moore's  Instablog

Dustin Moore
Send Message
Dustin Moore is a researcher and analyst focusing on overlooked and undervalued investments. He enjoys analyzing under-the-radar companies with massive upside potential and those with favorable risk/reward ratios. On Twitter! @dustinrmoore https://twitter.com/dustinrmoore
My blog:
My SA Instablog
  • The Sun Is Not Shining on Worldwide Energy & Manufacturing USA…Yet. 2 comments
    Sep 7, 2010 5:45 PM | about stocks: WEMU, FSLR, STP

     

    From time to time there are those stocks that rise substantially and have everyone looking back wondering why they never owned the stock back when it was so cheap.  My goal is to identify these stocks and buy them before everyone jumps in.  I am always looking for ‘under the radar’ stocks, those I feel are overlooked and undervalued.  I recently stumbled across solar company Worldwide Energy & Manufacturing USA, Inc. (OTCPK:WEMU).  The company has been ignored and unfairly oversold.  Analysis of the company is provided and the case for its likely bright future is outlined.

    What Worldwide Energy & Manufacturing USA, Inc. is:

    Per the company website:

    Worldwide Energy and Manufacturing USA, Inc., headquartered in South San Francisco, California, is a 17-year-old engineering-oriented firm specializing in photovoltaic (PV) module, mechanical, electronics and fiber optic products manufacturing. The company's worldwide customer base includes the solar energy, wireless telecommunications, aerospace, automobile and medical equipment industries.  Worldwide’s competitive advantage is its ability to timely deliver high quality components at costs that are at least 50% less than what Worldwide’s customers pay for similar products in the United States.

    Recent Developments:

    I will start with a little backdrop on the most recently announced quarter.  Second quarter 2010 earnings were outstanding.  Revenue was up 30% from the first quarter 2010 and about 300% year-over-year (although the second quarter 2009 was admittedly dismal, this huge increase still demonstrates the strength and momentum of the company).  More importantly, the company states that they “…anticipate continued growth over 2009 sales levels as we move into the second half of 2010.”.

    In fact, the Worldwide recently announced an update of financials for the month of July 2010.  The results were very positive and should reflect how the rest of 2010 will pan out for the company.  Furthermore, it makes the future of WEMU quite clear from an investor standpoint, in an otherwise very unclear economy.  Here are details on the July performance:

    Revenues for July were up about 229% compared to July last year, totaling approximately $14.8 million.  That is almost as much as the ENTIRE third quarter last year of 18.6 million in revenue.  The company’s revenue projection for this quarter is $44 million, which would translate into a mammoth 236% jump.  Even better is that this will be coupled with improving profit margins from the previous quarter. 

    It should also be noted that Worldwide has recently opened a new 129k sq ft photovoltaic solar module production and R&D facility in China.  Production there is set to begin in the fourth quarter this year.  This is important because the company cites this new facility as a strong driving factor that should improve gross and net margins.  The CEO also sees a sharp increase demand for the company’s high-quality solar modules creating scale economies that will also improve future margins.  WEMU has also expressed plans to add 80 more employees by the end of the year, reflecting the clear increase in demand for their products as well as demonstrating the confidence management has in their future.

    But oddly, all of this very news has had almost no effect on the stock price.  However, this makes for a great buying opportunity for investors.

     

    Other important facts to note:

    ·         -Insiders own almost 40% of stock, which is always a powerful indicator of management confidence and should put investors at ease that their fate is largely tied to those controlling the company.

    ·         -Conservatively, I project a P/E of about 5 – yes 5 – by the end of the year (if company profit expectations hold) and that could, and is likely, to be too high.  This number is very low in the solar industry where much higher P/E’s are common in slower growing companies such as First Solar (NASDAQ:FSLR) or Suntech (NYSE:STP).  Global demand for solar continues to grow, with heavy investment from China.  This should continue to play into the company’s playbook.

    ·         -It is unfortunate that company trades over-the-counter as opposed to being listed on the NYSE or NASDAQ.  No doubt this prevents a higher value of the company shares.  However, the company confirmed that the only roadblock to uplisting is that share price must trade above $4.00 for at least 10 trading days.  This does not guarantee uplisting, but it is the only hurdle left.  Owning the stock at these levels may be a good idea ahead of a possible uplisting.

    ·         -The stock has bounced off its 52 week low, trading near cash levels.  Thus, there is low downside potential, high upside potential.

    ·         -Just days ago, Worldwide’s CEO Jimmy Wang quietly purchased 10,000 more shares spread out over the first three days of this month (adding to his already enormous 1.6 million shares).  This may not be a large buy but demonstrates the confidence management has, as well as their belief the stock is cheap here.

    ·        - Most significant fact: WEMU has essentially no debt, but has confirmed that they have a pile of $13.5 million in cash.  That translates into $2.39 in cash per share.  As of 9/7/2010, the stock traded at only $3.69!  That is a very small premium to pay for a growth stock barely trading above cash levels.  This also makes it much less risky to own, with a very high upside potential in my opinion.

    At least in the near term, investors should benefit from the increasingly positive growth and rising profits from this company.  The recent financial updates are not accurately reflected in the share price.  Company forecasts for the remainder of the year make the current price barely above what cash levels will be by the end of the year.  Furthermore, none of this is taking into account the tremendous growth the company and the solar industry as a whole.  Eventually the sun will shine on the stock and investors will jump in – ultimately value will have to be realized.



    Disclosure: Long WEMU.OB
Back To Dustin Moore's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (2)
Track new comments
  • Value Digger
    , contributor
    Comments (3353) | Send Message
     
    I really like this unknown company. WEMU seems that it will make about 1,30 $ eps for 2010.

     

    if you apply a decent pe = 10 it gives a pps= 13 $.

     

    2011 is even more exciting for WEMU since the new facility will be fully integrated.
    4 Nov 2010, 04:16 AM Reply Like
  • Value Digger
    , contributor
    Comments (3353) | Send Message
     
    Btw the pe=10 is a very decent pe for the solar companies. the majority of the solar companies have pe > 10.
    4 Nov 2010, 04:17 AM Reply Like
Full index of posts »
Latest Followers

StockTalks

  • $MSFT asks USPTO Board for rehearing regarding their refusal to institute IPR for $VHC '135 patent. Yet again aiming at "a complaint" lingo.
    about 22 hours ago
  • $VRNG Majority: Scope of the claimed invention is staggering..asserted claims fall outside section 101 because their broad and sweeping..
    Aug 15, 2014
  • Majority: "simply recite the use of a generic computer to implement a well-known and widely-practiced technique for organizing information."
    Aug 15, 2014
More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.