Savvy Trades and Investments

[Knowledge is King]

Pounding the table on PSIX($3)

I've been a buyer of Power Solutions International (PSIX) since they announced their Q1 results on 5/11/23. Q1 revenues surged to $116.5M (vs $98.9M), with EPS of $.16 vs a loss of $.11. I thought sure the stock would get a look after Q2 results were reported on 8/14/23, when the company reported Q2 revenues of $121.9M (vs $120.5M) and robust EPS of $.28 vs $.06. For the trailing 12 months ended 6/30/23, PSIX has revenues of roughly $500M and EPS of $.99, suggesting a trailing P/E of just 3.

PSIX has strung together 5 profitable quarters in a row as a renewed emphasis on margin expansion has proven quite successful.

Power Solutions International designs, engineers, manufactures and markets a broad range of advanced engines and power systems, powered by a wide variety of fuels such as natural gas, propane, biofuels, gasoline and diesel. Company end-markets include the power systems, industrial and transportation sectors. The company website is www.psiengines.com

The Q2 earnings PR is linked here: https://www.otcmarkets.com/stock/PSIX/news/story?e&id=2605727 I will note that the look-ahead commentary in the PR is decidedly cautious.


The big negative in PSIX story is debt, but the company's strong EBITDA cash flows are helping put a nice dent in the debt load this year: total debt at 6/23 was $190M vs $211M at 12/22. The other big negative (in my view) is that Weichai America Corp owns about 51% of the stock, and Weichai is owned by a Chinese company. I will note that my research indicates that Weichai paid about $8/share for their stake, so they are highly motivated to get the stock price up IMO. There are 3 other major shareholders with stakes of 10%, 11% and 14.6%. As a result I view PSIX as a low-float play as well; I estimate the float at approximately 5M shares.

In summary, $3/share is just too cheap for a half-billion dollar revenue company generating solid EPS and EBITDA on current operations.