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Will Zoltek Be Jolted Back to Life?

Rich Duprey
October 23, 2012

The world's top value investors love it when their best stocks ideas are selling at bargain-basement prices. For those rarified investors, companies offering fire-sale prices become no-brainer buys. So regular investors like you and me would do well to emulate the masters and look at companies offering a "buy one, get one" sale on their stocks.

Carbon fiber manufacturer Zoltek (Nasdaq: ZOLT  ) has had the wind taken out of its sails as fears of waning enthusiasm for the wind power industry weighs heavily on its performance. While you'll naturally want to do more due diligence before buying in, this still might be an opportunity to pick up a quality stock at a severe discount.

Zoltek snapshot

Market Cap

$249 million

Revenues (TTM)

$185 million

1-Year Stock Return


Return on Investment


Dividend and Yield


Estimated 5-Year EPS Growth


52-Week High


Recent Price


CAPS Rating (out of 5)


Source: N/A = not applicable; Zoltek doesn't pay a dividend. TTM = trailing 12 months.

Let's just make sure there's nothing more seriously wrong with it before you go and plug it into your portfolio.

No tailwind in sight
It's become fairly clear that without the regular infusion of massive government subsidies, green energy can't be competitive. As tariff support, tax breaks, credits, and loan guarantees expire or are withdrawn, global solar and wind power companies fall by the wayside as cost effective production can't be achieved. Uncertainty surrounding the extension of the production tax credit led industry-leading turbine producer Vestas Wind Systems to eliminate nearly 20% of its U.S. workforce.

That's a major problem for Zoltek, which generates half of its revenues from the turbine maker. Its stock had gotten a bit of a boost early in the month because of a bullish analyst call but subsequently went into freefall once again, tumbling 13% over the last three weeks and now sitting more than 51% below its 52-week highs.

Despite growing revenues 30% last quarter, the future remains shaky for the materials maker since wind power is the near-term catalyst for growth, but more doubts about the energy source continue to crop up. A recent Reuters story noted that offshore wind farms -- generally considered the most popular choice for the unsightly turbines since they're far out to sea -- cost more per megawatt to hook up to the electric grid than it does to build new gas-fired power plants.

Four on the floor
So, if wind energy won't be able to waft Zoltek higher, what will the company turn to? Cars.

Zoltek anticipates the automotive industry will eventually become the largest consumer of carbon fiber material. It established a partnership with Magna International (NYSE: MGA  ) to develop carbon fiber sheet molding compounds for the automotive industry, which has increasingly been looking for alternatives to meet s