GrowthTurtle
Data Science PhD & IEEE Fellow, Ex-Two Sigma
Power Solutions International looks cheap against its earnings, at 12x trailing and 11x next year's versus the roughly 19x industrial equipment makers usually get. Putting 19x on next year's estimated $3.26 a share, give or take 12%, gives fair value of about $54.51 to $69.37, with the stock 33% under the low end; a pullback level sits at $35.28. This is a levels-only read off reported earnings and revenue estimates, with no fundamental work. x.com
Power Solutions International's large gas and diesel gensets for prime power are a big opportunity that is not priced in. Results improved after a disastrous Q1, though gross-margin guidance of 25% is below historical levels and management could not explain the gap versus Generac. x.com
Power Solutions International's weak first half looks like a timing air pocket, not a deteriorating data center opportunity. Import data suggest it received about 20 large Weichai engines in August, multiples of its January-July total, consistent with management's view that 2H revenue will exceed 1H. At 1H margins, 2H EPS could be about $2, or $4 annualized, only 10-12x earnings. The Generac-Amazon deal validates the platform of Weichai, ~46% owner of PSIX, with US data center buyers. x.com
Power Solutions International has no recovery in sight after missing every number badly. Revenue was $128.6M versus $160.8M expected, EPS $0.36 versus $0.52, and EBITDA fell 47% to $13.9M. Gross margin dropped 680bps to 22.9%, deterioration that takes multiple cycles to rebuild. Guiding Q2 as generally consistent with Q1 signals the margin compression is not a one-quarter anomaly. After a 50% one-day drop, there is no obvious catalyst to catch this knife. x.com
