American Superconductor Failing to Meet Potential

High-flying renewable energy companies often have a quick rise and a sharp fall. American Superconductor (NASDAQ: AMSC  )  is a prime example: An employee sold trade secrets to Sinovel and the company's largest customer quickly said that its services are no longer needed.  

We're a few years past that defining moment and American Superconductor is still in business, but it's high time we start to wonder how long that will be the case. The company's revenue has been stagnant for two years, losses are mounting up, and the cash cushion that once existed is vanishing.

AMSC Revenue Quarterly Chart

AMSC Revenue Quarterly data by YCharts

The first fiscal quarter showed very little of the improvement the company needs to stay in business. Revenue fell 20% from a year ago to $23.1 million and net loss grew slightly to $10.5 million, or $0.18 per share. Management doesn't foresee improvement next quarter either with revenue expected to grow only slightly and net loss to be less than $17 million, or $0.28 per share.

The wind business was the one hit by Sinovel but the grid business, consisting of utility-scale inverters and other heavy equipment, was supposed to begin picking up the slack. With just $8.4 million in revenue this quarter, down from $12.2 million a year ago, momentum is heading in the wrong direction.

That's why investors really need to start looking at American Superconductor's balance sheet. Cash stands at $32.6 million; it burned through $9.3 million in operating cash during the quarter. Unless financials significantly improve the company will be looking for new sources of cash in the next year, or worse. Of course, there could be a huge settlement in lawsuits currently pending in Chinese court but that's a shot in the dark at best. This simply isn't a stock to be on right now, especially trading at a market cap higher than annual revenue.

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9/29/2016 4:00 PM
AMSC $6.96 Down -0.10 -1.42%
American Supercond… CAPS Rating: *