Is now the right time for a solar energy firm to list on the stock exchange? On one hand, the world is hungry for cheaper and more sustainable forms of power. On the other, oil prices are falling again, weakening the potential cost-saving attraction of renewables.
On Thursday, we should get some indication of how the market feels when SolarEdge Technologies makes its initial public offering. Before you pick up shares, take a look at this digest to learn about what the company does, and how it's been performing lately.
SolarEdge Technologies' edge is that its systems are more efficient than competing products. In particular, its "intelligent" inverters (devices that convert direct current electricity -- such as that derived from solar cells -- to the alternating current used in businesses and residences) maximize power generation while reducing energy losses, according to the firm.
The company has been at this for a while. It was incorporated in the U.S. in 2006, although its headquarters are located in sun-baked Israel.
Judging by its financials, SolarEdge products -- which are generally sold to solar installers and related entities -- seem to be catching on. After a fiscal 2013 that saw revenues increase by only 5% on a year-over-year basis to $79 million, 2014's top line grew by 69% to $133 million. The company also managed to shave its net loss that year; it came in at $21 million, down considerably from 2013's $28 million.
The current fiscal year, meanwhile, seems to be off to a roaring start. In its first six months, the top line of $140 million already exceeds the full-year 2014 tally. And the company has been profitable, with net income reaching nearly $6 million.
SolarEdge's sharply increasing numbers are due to what it terms the "rapid growth of U.S. solar PV installations." Nearly 50% of the company's fiscal 2014 came from our market. What helps is that the company supplies big players in the solar segment; SolarCity (NASDAQ:SCTY), for one, is a key client, as is Krannich Solar.
Profit from the sun
Although the world is going to feast on cheap oil as long as it can, demand for renewable energy sources is likely not going to abate on a planet that wants to get cleaner.
SolarEdge Technologies seems well poised to take advantage of this, especially since it can attack the market on the basis of value thanks to those state-of-the-art inverters. The company's steep revenue increases are encouraging, as is the fact that top line is growing faster than costs (hence the recent net profitability).
Seven million shares of SolarEdge Technologies will hit the market on Thursday, priced at $16 to $18 apiece. The stock will trade on the NASDAQ under the ticker symbol SEDG. The lead underwriters of the issue are Goldman Sachs and Deutsche Bank Securities.
Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs and SolarCity, and owns shares of Deutsche Bank (USA) and SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.