Orion Energy Systems Inc. (OESX)

[savin4college]

Bullish Discussion of $OESX LED Lighting Potential on SeekingAlpha
SeekingAlpha Article Feb 22, 2017

Summary:
* Orion reported another great quarter with YoY revenue growth of 23%.
* LED segment now represents 82% of revenues and grew 28% YoY.
* Previous declines in legacy fluorescent/solar products are finished & no longer drag on consolidated results.
* Stock remains incredibly undervalued at less than 0.55x next year's sales and a 2-year forward EV/EBITDA multiple of under 4.0x.
* Outlook for LED demand over the next decade remains as strong as ever.

Price Target
To arrive at our price target of $3.75 we looked at a variety of valuation multiples ranging from P/S, EV/EBITDA, and P/E. $3.75 represents just a 1.4x multiple of current-year sales, 17.9x two-year forward P/E multiple, and 8.9x two-year forward EV/EBITDA multiple. Again, given the growth outlook for the LED industry over the next decade, OESX's continued expansion into the agency sales channel, and strong balance sheet, we believe these multiples are fair.

If you use a $3.00 target, the implied multiples become 1.1x this year's sales, a two-year forward P/E multiple of 13.6x, and a two-year forward EV/EBITDA multiple of 6.8x. We believe those multiples are far too low; a range of $3.50-4.00 is appropriate.

At current levels, Orion stock is trading at a modest premium to book value and only 0.55x next year's sales. With positive EBITDA and CFO next year and over $12 million of net cash on the balance sheet, we struggle to justify hardly any downside from current prices and believe Orion is a truly unique risk-reward opportunity.