Westport's Sell-Off Creates Opportunity

Westport Innovations' (Nasdaq: WPRT  ) performance in the first quarter was nothing to write home about, with the bottom line continuing to pose a problem as losses widened from the year-ago period.

But what if I tell you these losses don't bother me, and that the stock shedding nearly 9% since the results came out actually represents a great opportunity for long-term investors? Take a look at why I'm still positive about Westport.

Nearing breakeven
Westport's books might be replete with red ink, but look at its top-line growth. The company has started the year on a good note, with first-quarter revenue surging 133%. I am emphasizing top-line growth rather than the bottom line because that seems more sensible for companies such as Westport that are still undergoing a growth phase. Westport's gross margins have consistently stayed well above the 30% mark during the past few quarters (it stood at 32% in the first quarter).

Worthy bonds
As far as business is concerned, Westport boasts of some strong joint ventures and partnerships. The one with Cummins  (NYSE: CMI  ) , in particular, is adding great value to the company. This JV brought in a majority of the revenue for the company in the first quarter, and even contributed a positive $2.5 million to Westport's bottom line that helped offset losses in other divisions.

The next big thing for this venture is slated to be the new fuel-efficient ISX12 G engine that Cummins will start producing on a full scale next year. With these engines, the company hopes to make it big in new market segments such as regional hauling and refuse trucks. Strong preliminary interest by truck makers suggests that these engines could be a hit. For example, PACCAR (Nasdaq: PCAR  ) recently displayed some new models fitted with the ISX12 G engines at the Mid-America Trucking Show held in Louisville, Kentucky. Navistar International (NYSE: NAV  ) has also stepped into the arena by opting for the Cummins Westport engines for its new trucks.

Speaking of partnerships, there are way too many to be mentioned in this article. From auto giants to equipment powerhouses to oil majors, Westport is involved with them all. A recent partnership with Ford (NYSE: F  ) looks promising enough. Westport's new compressed natural gas bi-fuel system, which Ford had shown interest in last year for its F-series pick-up trucks, is already available for sale through its dealers and distributors. As fellow Fool Jeremy Bowman rightly noted, it could turn out to be a good source of revenue for Westport, considering its potential to save more than $2 per gallon of fuel costs.

The Foolish bottom line
Natural gas conversion is gathering steam -- there's no doubt about that. The latest encouraging announcement has come from the British Columbian government, which has announced a program to provide $62 million worth of incentives to utility companies taking steps to promote the use of natural gas vehicles in the region. Westport has already approved this program, and I won't be surprised if it soon comes up with ways and means to avail this lucrative opportunity.

Westport's technology and patents should take it far, and I feel those with a long-term investment horizon needn't worry about the recent drop in its stock prices. To track Westport, click here to add it to your stock watchlist.

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Fool contributor Neha Chamaria does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Westport Innovations and Ford. Motley Fool newsletter services have recommended buying shares of Westport Innovations, PACCAR, and Ford, as well as creating a synthetic long position in Ford. The Motley Fool has a disclosure policy.
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