Why Power Solutions International Inc. Is Up 330% This Year and Westport Has Crashed

Shares of Power Solutions International (NASDAQ: PSIX  ) have exploded upward by 330% this year, while shares of its peer, Westport Innovations (NASDAQ: WPRT  ) , have taken a major haircut during the same period. What has caused such a massive division in the way investors are looking at these two alternative fuel engine companies?

Motley Fool industrials analyst Blake Bos thinks the difference lies in Power Solutions' focus on the niche market of alternative fuel engines for power generation systems at natural gas wells, an area where the company has seen strong sales recently. PSI has also seen an average revenue growth rate of 10% per year over the past five years, which has spiked even higher in the past three years. Westport Innovations, on the other hand, is heavily reliant on the thesis that heavy-duty engines, such as those found in semi trucks, will begin to adopt the technology to utilize liquefied and combustible natural gas in a big way in the future.

Blake ultimately thinks that Wall Street has set its expectations very high for both of these stocks, with investors showing an enormous amount of enthusiasm over what many hope will be a natural gas engine revolution, and that those high expectations will translate into a hefty premium on both of these stocks. Does he see now as the time to take a position in Power Solutions or Westport Innovations? Find out in the video below.

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Read/Post Comments (6) | Recommend This Article (2)

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  • Report this Comment On December 14, 2013, at 8:18 AM, marvsehn wrote:

    Fools recommended wprt a year ago and I bought when over $40. I really look like a fool now and am dumping both!

  • Report this Comment On December 14, 2013, at 3:59 PM, Thinkerbus wrote:

    Posted this several days ago, but article had already gone stale, so no readership. will share again here.

    I'm rapidly getting disappointed with WPRT and its continuing losses combined with optimistic messages. It could be that Westport announced the release of version 2.0 of its (HPDI) technology because its existing products are not up to par. Spend, spend & spend--it is what engineering firms do, especially when they have other people's money available. Now getting pretty tired of waiting for the next shoe to drop. I'd be cautious with this engineering JV firm that has little control of its own destiny--they have to rely on a world of other companies to incorporate their technology. Even Cummins is now saying it is developing a 15 litre N.G. engine that will directly compete with the 12 litre CMI/WPRT

    JV engine that Cummins is delivering today. All is fair in love and war. These JVs seemed to start as love, but might now be turning to war. Lastly, I requested information directly from WPRT (as a stockholder), such as why Cummins is not showcasing the 12 Litre engine in its sales distribution network and they responded with generalities, no real answers--but seriously wanted to know why I wanted the information. Be cautious with this company. You might wait until one of their major products gains real market traction before risking more money on half full glasses. Remember they are well paid engineers and engineers require tight management control if they are to stay on track and efficiently produce the basic products they are charged with. I know this from years of experience dealing with many engineers and both their successful and failed projects.

  • Report this Comment On December 14, 2013, at 8:44 PM, Realexpectations wrote:

    I buy into the fear

    nothing has fundamentally changed about the company or its outlook

  • Report this Comment On December 19, 2013, at 11:27 AM, Rerednaweht wrote:

    More likely is the scope of the various projects are being micromanaged to death. I have worked and managed many macro scale projects where the customer was getting exactly what they wanted ahead of time and under budget. We had a clear contract and a plan with identified the key elements required as well as the project scope. The engineering team had finished the project and was finalizing turnver to the customer when someone at the top with no engineering background had an 'epiphany' and forced everyone to start over from scratch several times. Cost overruns, failure to deliver on time, and the engineering team was blamed for not being to accomodate the over 2 dozen new versions of the same project. Independent audit determined gross miss-management. But he got off with a golden parachute.

    Needless to say, morale in the company plummeted. But this is par for the course these days.

    I'm a buy and hold person so I'm going to keep my small stack in WPRT for now.

    And I believe another main factor that no one (certainly at the Fool) predicted was the US becoming the world's largest OIL producer. 5th this year, and on track for worlds largest in the next 2-3 about a reversal of fortune. With the plentiful supply of oil being available, research into alternative methods, even as a backup for the next time oil runs out is being pushed to the back burner. Unfortunate but very American.

  • Report this Comment On December 26, 2013, at 12:42 PM, DoubleFelix wrote:

    This is like comparing apples and hand grenades. They are both about the same size and weight, but if you can't tell the difference, you really shouldn't go near either.

    The reason WPRT is cratering is simple. They have no control over their destiny. The amount of product they control and manufacture themselves is minuscule. The revenue volume comes mostly through "partnerships" with companies that have huge manufacturing operations. Westport has no leverage in those deals, and will never be in a position to command a significant profit. Notice that they don't get any closer to profitability even when they double their revenues. This is because the senior partners are in a position to send the profits to their own operations and WPRT really can't do anything about that.

    WPRT is headed for penny stock territory. There was a time a couple of years ago when they might have made a go of it if the market for OTR engines burning LNG would have really taken off.

    Instead they just hyped the stock and went through several stock issues that has diluted the stock to the point that it is mathematically impossible for them ever to justify a $30 price based on fundamentals. I do hope that we will see another cycle of hype that pushed over $30 because I still have a few lots of this stock I have been keeping around to remind me not to buy stocks like this.

    Fundamentally WPRT is in bad shape. They will run out of cash before they ever generate a significant profit, and now that the Ponzi cycle is broken on the stock price, they will have to issue more stock, probably at $12/share or something. This is not going to sit well with all the people who are in it at #35.

    PSIX is quite a different situation. They manufacture their own stuff, which puts them at least somewhat in control of their own destiny. The rational price for PSIX should be about $35. I bought some as soon as it was listed around $25 and sold at $37 because that was getting way above the fundamental value of the stock. And now the price is ridiculous. It will have to come back down, once the mob decides that isn't going to pay off at the current price.

    I wouldn't go anywhere near either of these stocks right now. They have nothing but downside.

  • Report this Comment On February 07, 2014, at 6:33 PM, 2old2fool2 wrote:

    Your video doesn't mention anything about PSIX having to meet any EPA engine approvals. I pretty sure that engines that do NOT operate on our nations hi-ways are not required to meet those rigid EPA standards, but that is the limit to that idea. WPRT does the required engineering to retro fit there CNG or or LNG patented systems and get them approved by the EPA before releasing them to market. Does PSIX make any NG engines that meet the EPA requirements for 2014?

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