Here’s why we think Orion Energy Systems (NASDAQ: OESX) is worth watching


Like a puppy chasing its tail, some new investors are often looking for “the next big thing,” even if that means buying “history stocks” with no income, let alone profit. But as Peter Lynch put it in One Up on Wall Street, ‘Long shots hardly ever pay off.’

Contrary to all this, I prefer to spend time on companies like Orion energy systems (NASDAQ: OESX), which not only has income, but also profits. Now, I’m not saying the stock is necessarily undervalued today; but I cannot shake an appreciation of the profitability of the company itself. Loss-making businesses always race against time to achieve financial viability, but time is often the friend of the profitable business, especially if it is growing.

Check out our latest review for Orion Energy Systems

Improved profits of Orion Energy Systems

In a capitalist society, capital runs after profits, which means that stock prices tend to rise with earnings per share (EPS). So like the hint of a smile on a face I love, growing EPS usually makes me look twice. You can imagine, then, that it almost knocked me down when I realized Orion Energy Systems had increased their EPS from US $ 0.21 to US $ 1.00, in a short year. When profits grow so quickly, it often means good things ahead for the business. But the key is to discern if something deep has changed, or if it’s just a one-time boost.

A close look at revenue growth and profit before interest and tax (EBIT) margins can help shed light on the sustainability of recent earnings growth. Orion Energy Systems shareholders can be confident that EBIT margins are up 6.1% to 8.7% and revenues are increasing. It’s great to see, on both counts.

The graph below shows how the company’s bottom line has progressed over time. To see the actual numbers, click on the graph.

NasdaqCM: OESX Earnings and Revenue History September 14, 2021

Fortunately, we have access to analyst forecasts from Orion Energy Systems. future profits. You can make your own predictions without looking, or you can take a look at what the pros are predicting.

Are Orion Energy Systems Insiders Aligned With All Shareholders?

I like that business leaders have some skin in the game, so to speak, because it increases the alignment of incentives between the people who run the business and its real owners. Accordingly, I am encouraged that insiders own shares of Orion Energy Systems of considerable value. In fact, they hold US $ 15 million worth of its shares. This shows strong buy-in and may indicate a belief in business strategy. These holdings represent more than 11% of the company; skin visible in the game.

Should You Add Orion Energy Systems To Your Watchlist?

Profits from Orion Energy Systems took off like any random cryptocurrency, in 2017. This kind of growth is simply eye-catching, and the large investment held by insiders certainly informs my view of the business. Sometimes rapid growth in BPA is a sign that the business has reached an inflection point; and I like those. So yes, on this short review, I think it’s worth considering Orion Energy Systems for a place on your watch list. We should say that we found out 2 warning signs for Orion Energy Systems (1 is significant!) That you should know before investing here.

Of course, you can (sometimes) buy stocks that are not growing income and not have insiders who buy stocks. But as a growth investor, I always like to check out companies that to do have these characteristics. You can access a free list of them here.

Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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