Over the past six months, American Superconductor’s shares (currently trading at $29.00) have posted a disappointing 6% loss, well below the S&P 500’s 13.6% gain. This might have investors contemplating their next move.
Following the drawdown, is now a good time to buy AMSC? Find out in our full research report, it’s free for active Edge members.
Why Are We Positive On American Superconductor?
Founded in 1987, American Superconductor (NASDAQ:AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.
1. Skyrocketing Revenue Shows Strong Momentum
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, American Superconductor grew its sales at an incredible 27.7% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, American Superconductor’s margin expanded by 22.2 percentage points over the last five years. American Superconductor’s free cash flow margin for the trailing 12 months was 7.1%.
3. New Investments Bear Fruit as ROIC Jumps
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, American Superconductor’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.
Final Judgment
These are just a few reasons why American Superconductor ranks highly on our list. After the recent drawdown, the stock trades at 36.5× forward P/E (or $29.00 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More Than American Superconductor
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