Pioneer Power Solutions, Inc. (PPSI) in Fort Lee, N.J. designs, manufactures, sells, and services electric power systems, distributed energy resources, used and new power generation equipment, and mobile EV charging solutions. The company operates in the Transmission & Distribution Solutions and Critical Power Solutions segments. It serves the utility, commercial, and backup power markets.

PPSI’s last reported quarter delivered a 72.4% year-over-year increase in revenue, but the company posted a $788,000 net loss, compared to $351,000 in net income in the year-ago period. In March, the company announced that it had received a second purchase order for its E-BOOST skid-mounted mobile EV charging solution. The new orders are expected to be revenue accretive, but the company is unlikely to turn a profit in the near term; analysts expect PPSI’s EPS to remain negative in fiscal 2022 and 2023.

PPSI’s shares have declined 34.5% in price year-to-date, while they have gained 35.4% over the past year to close the last trading session at $4.91. They are currently trading 66% below their 52-week high of $14.43, which they hit on Dec.9, 2021.

Here is what could influence PPSI’s performance in the upcoming months:

Disappointing Financials

PPSI’s operating expenses increased 38% year-over-year to $1.74 million for its fiscal first quarter, ended March 31, 2022. The company’s loss from continuing operations narrowed 21.2% year-over-year to $871,000. Also, its net loss came in at $788,000, compared to net income of $351,000 in the year-ago period. In addition, its loss per share was  $0.08, compared to  EPS of $0.04 in the year-ago period.

Top-line Growth May Not Translate into Bottom Line Improvement

While analysts expect the company’s revenue to increase 123% and 33.6% in its fiscal 2022 and 2023, respectively, PPSI’s EPS is expected to remain negative. However, the loss is expected to decline  this year and next.

Lower-than-industry Profitability

PPSI’s trailing-12-month net income margin and EBITDA margin are negative compared to the 6.76% and 13.30% respective industry averages. Its trailing-12-month levered FCF margin is negative, versus the 3.54%  industry average. Furthermore, the stock’s trailing-12-month ROA is negative, compared to the 5.41% industry average.

POWR Ratings Reflect Bleak Prospects

PPSI has an overall F rating, which equates to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PPSI has a D grade for Quality, which is in sync with its 0.73% trailing-12-month asset turnover ratio, which is 9.1% lower than the 0.80% industry average.

It has an F grade for Growth, which is consistent with its weak fundamentals and growth prospects.

PPSI is ranked #81 among 94 stocks in the C-rated Industrial - Equipment industry. Click here to access PPSI’s ratings for Value, Momentum, Stability, and Sentiment.

Click here to check out our Industrial Sector Report for 2022

Bottom Line

Shares of PPSI are currently trading below their 100-day and 200-day moving averages of $5.59 and $5.40, respectively, indicating a downtrend. Despite an expected increase in its revenues, the company’s EPS is expected to remain negative in fiscal 2022 and 2023. Furthermore, given its weak financials and lower-than-industry profitability, the stock is not expected to perform well. So, we think it could be wise to avoid the stock now.

How Does Pioneer Power Solutions, Inc. (PPSI) Stack Up Against Its Peers?

PPSI has an overall POWR Rating of F, which equates to a Strong Sell rating. Therefore, one might want to consider investing in other Industrial - Equipment stocks with an A (Strong Buy) or B (Buy) rating, such as Hurco Companies, Inc. (HURC), Standex International Corporation (SXI), and EnerSys (ENS).

PPSI shares were unchanged in premarket trading Thursday. Year-to-date, PPSI has declined -34.53%, versus a -15.56% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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