Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Cool Your Jets on This Chinese Small Cap

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

By all accounts, September was a great month for stocks. The S&P 500 gained 8.8%, making for the best September since 1939. The month was particularly kind to A-Power Energy Generation Systems (Nasdaq: APWR  ) , which saw the stock rise 45% off of its August close. I guess that answers my question.

A-Power investors have indeed caught a break, as overly negative sentiment was dispelled last month (last week, mainly) by a series of announcements. Mid-month, we saw a press release about a feasibility study on a biomass-fired power plant in Nevada. That one didn't really generate much enthusiasm.

In contrast, A-Power brought us three pieces of news last week that really lit a fire under the stock. Tuesday saw the announcement of first production of a prototype wind turbine destined for the company's wind project in Texas. On Wednesday, A-Power announced a $279 million engineering, procurement, and construction (EPC) contract for a Chinese hydropower project. Revenue will be recognized over the course of the six-year project on a percentage-of-completion basis. Finally, on Thursday, A-Power announced an additional EPC win for its core distributed generation business. This contract is worth around $36 million, and should take fewer than two years to complete.

Taken together, these pieces of news don't actually tell me a ton about the long-term viability of the business. The prototype news doesn't tell me that the wind farm project is a lock. A formal financing agreement would have been far more monumental. As for the EPC deals, those are A-Power's bread and butter. Power plants are the firm's core competency, and the awards are pretty much business as usual.

As I suggested in late August, A-Power was too cheap, and this near-term break was likely. I had no idea the mispricing would correct so quickly, however -- or on news that was, in my opinion, incrementally positive, but nothing earth-shattering. It's interesting that one of the stocks I chose to make the case for A-Power's undervaluation, Duoyuan Global Water (NYSE: DGW  ) , had a brutal fall following accounting irregularities at related company Duoyuan Printing (NYSE: DYP  ) . A-Power suddenly trades at a premium to the former highflier (which I flagged as "seriously expensive" last year), on the basis of trailing sales.

So where do I stand now? Now that the stock has rebounded so significantly, I'm a lot less interested in A-Power as a potential short-term speculation. Sure, it's still cheaper than Chinese cleantech stocks like JinkoSolar (NYSE: JKS  ) , but that company has one of the best cost profiles in the solar industry. As for a long-term investment, A-Power has never met my growth stock criteria.

Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1319189, ~/Articles/ArticleHandler.aspx, 10/23/2016 2:44:36 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
APWR.DL $0.00 Down +0.00 +0.00%
A-Power Energy Gen… CAPS Rating: ***
DGWIY $0.00 Down +0.00 +0.00%
Duoyuan Global Wat… CAPS Rating: **
DYP.DL $0.00 Down +0.00 +0.00%
Duoyuan Printing CAPS Rating: ***
JKS $17.02 Down -0.14 -0.82%
JinkoSolar Holding… CAPS Rating: **