Orion Energy Systems (NASDAQ:OESX) is booming on the basis of a huge ($100M+) contract, but the one thing on investors' minds will be to what extent the company can replace that when that starts to wind down.
We took a position in Orion Energy Systems for the SHU portfolio some time ago at $2.70, but the shares have not really prospered all that much since, basically being range-bound.
At first sight, this is somewhat odd as the company has produced an impressive improvement in its business:
And the first half of its fiscal 2020 was no different, with revenues up 266%!
Big Projects
Most of the boom in the company's fortunes is due to a big ($100M+) national account (believed to be Home Depot (HD) on the Q2CC by an analyst) and this also explains immediately why the stock price hasn't risen more, despite a crescendo in the quarterly figures.
That big project will run its course at some time, and whether the company can get another big project like that to replace it remains to be seen. But having such a big successful project, delivering energy savings at certain locations is even better than expected and on schedule (Q2CC):
This contract is clearly notable for its size, but even more for the potential it creates for us to replicate our unique capability of design through manufacturing and on-site nationwide installation with other large national accounts... And in addition, we have more opportunities beyond what we did initially for that customer in other areas of their business where we are seeing some traction also.
Not only are repeat orders from the same customer more likely, it also has increased the company's visibility and credibility, and what's more (Q2CC):
I would just expand to say that, that solution we developed for them
