On Wednesday, Roth/MKM began coverage on Powell Industries (NASDAQ:POWL), assigning the stock a Buy rating and setting a price target of $312.00. The firm's analysis comes as Powell demonstrates remarkable growth, with revenue increasing nearly 45% over the last twelve months.
According to InvestingPro data, the company's stock has delivered an impressive 184% return year-to-date. The firm's analysis is based on the company's favorable position in relation to several ongoing secular trends. These trends include the ongoing electrification and expansion of electrical grids, the construction of data centers, infrastructure investments, and the transition to different energy sources.
The analyst from Roth/MKM highlighted Powell Industries' ability to maintain record backlog levels, noting that this has been achieved without relying on the large-scale projects that have previously driven the company's financial results.
InvestingPro analysis reveals the company's strong financial position, holding more cash than debt on its balance sheet and maintaining healthy liquidity with a current ratio of 1.81. The broad-based momentum in recent orders is seen as a positive indicator for the company's future performance.
Looking forward, Roth/MKM expects Powell Industries to experience continued growth and margin expansion. The firm has conservatively projected that the company's adjusted EBITDA (AEBITDA) will rise to $223 million in FY26, up from $206 million in FY23.
This forecast suggests confidence in the company's financial trajectory over the next few years. The company currently maintains a healthy gross profit margin of 27% and has shown strong profitability with a return on equity of 36%.
The analyst's commentary underscores the belief that Powell Industries' stock can sustain a higher than historical multiple. This optimism is rooted in the company's strategic positioning to capitalize on key industry trends that are expected to drive demand for its services.
Powell Industries, known for its provision of electrical energy solutions, is expected to benefit from the various industry movements outlined by Roth/MKM. The company's stock price target of $312.00 reflects the firm's conviction in Powell Industries' growth potential and strategic market positioning.
In other recent news, Powell Industries, Inc. reported fourth quarter earnings that surpassed analyst expectations, despite a shortfall in revenue. The electrical equipment manufacturer posted adjusted earnings per share of $3.77, beating the consensus estimate of $3.55. However, revenue fell short of estimates, coming in at $275 million, missing analyst projections of $286.49 million.
Despite this, Powell's Q4 sales saw a 32% YoY increase from the prior year period, with significant growth in its key sectors. For the full fiscal year 2024, Powell reported a 45% increase in revenue to $1.0 billion, and a 175% jump in net income to $149.8 million. Recent developments include optimistic projections for fiscal 2025 from CFO Michael Metcalf, despite a typically slower first quarter.
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