Sutron Is Attractive Due To A Fundamental Misunderstanding Of Its New Business Model
- Sutron is down 22% over the past three months as the market wrongly assumes that the recent poor performance will continue indefinitely.
- Margins and EBITDA are likely at trough levels and should rebound due to increased bookings, the realization of delayed orders and increasing end-market demand.
- Sutron has received no credit for expanding beyond a niche market with limited growth prospects to a growing number of markets with their own secular demand drivers.
- The focus on providing turn key projects consisting of bundled products and services should drive further margin expansion and provide greater revenue visibility due to longer-term contracts.
- The downside is limited by the strong balance sheet (no debt, cash is 35% of market cap) and cash flow (18% FCF yield).