written by reader The American Prius

By xiexgp@gmail.com, March 5, 2014

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Travis Johnson, Stock Gumshoe
March 5, 2014 11:07 am

That’s Westport Innovations (WPRT), I’ve covered it quite a few times over the years and mentioned it as the solution to this pitch in our free email back when the pitch first started circulating a couple months ago.

Here’s what I said about it when I last looked at the stock, back in January when I reviewed stocks for the Irregulars:

Westport Innovations (WPRT) – I suggested Westport five or six years ago, when it was emerging as a natural gas engine technology company with appealing prospects in the heavy truck business. It has suffered from “overpromise/underdeliver” almost every year since then, with waves of enthusiasm for the story crashing as it became clear, again and again, that the future promise of actual earnings was continually pushed further out into the future. The stock has had two bad years now, so is it finally looking appealing again?

Not really. Every time I look at them when the price is falling I think it should be attractive, but then I look at the financials and the company just can’t generate any kind of profitable volume. Revenue climbs every year, but costs climb too — and often their huge R&D investments mean that costs climb faster — I think there’s a great place for natural gas engines, particularly in heavy trucks and fleet vehicles, but the business case has never caught up with the promise, partly because it would probably take a really strong sustained government incentive program to make natural gas engines and natural gas refueling stations get to the kind of critical mass that could make companies like Westport or Clean Energy Fuels (CLNE) profitable. As investors we continue to look at the potential of, say, the 16,000 heavy drayage trucks in Southern California ports where the air quality concerns are high and think WPRT should get a huge boost in business, but then we note that competitors are selling other solutions there, too, and Westport has probably gotten less than 10% Of that fleet in the five years since they started trying to spur alternative development for that specific market. And that’s with natural gas at bargain prices, and, depending on who you ask, a reasonable business case for switching to natural gas engines even without government subsidies. In five years, WPRT has seen revenue grow by about 120%, but operating costs have grown by almost 400% and the share count has more than doubled. (Westport is again saying that it thinks it can effectively generate an operating profit by the end of 2014, similar to promises they’ve made regularly since 2007). I’m going to keep WPRT on the watchlist, because it’s such an appealing story that I’m sure it will be actively teased again soon, and it may end up working eventually — but it’s not the potential growth stock that I thought was worth speculating on back in 2008, it’s now a “show me” stock that has to do something to get their costs under control or prove the scalability of their business (ie, the potential that they might someday grow revenues faster than they increase their costs) before I can buy it again. It sure looks cheap for folks who remember seeing it at $40 or $50 in past years, and they raised cash fairly recently so they’re not on the verge of going bankrupt or anything like that, but in my opinion it’s not cheap enough to be worth buying just on potential. After this kind of multi-year beating you’d at least like to see the company have some insider buying. Nope, none for WPRT on either the US or Ca