Clear Skies Solar ( CSKH) A Must Read to Make Money!
– An Impressive Recent Performance, But We Think it Can Go Higher
by Joe on October 12, 2010
Clear Skies Solar ( CSKH) – An impressive performance, but we think it can go higher
Price and volume action on Clear Skies Solar was impressive yesterday with the Company reiterating its full-year 2010 guidance of revenues of approximately $15 million and a margin of 12% to 15%. The stock traded nearly 4,000,000 shares ending up more than 34% after an already steep rise on Monday. We think the shares will trade even higher, however.
With the shares closing at $0.051 on Tuesday, the entire market capitalization of Clear Skies Solar is only about $6.6 million. Considering the Company is indicating revenues for full year 2010 at $15 million, shares trade at only 44% of projected revenues. This is a very low valuation especially for a company in the solar space that plans to be profitable for the year. As we have indicated previously, a minimum of one to two times revenues should apply to a company with these fundamentals. Considering Clear Skies Solar is in the solar industry, which is projected to grow very quickly and receives significant investor attention, we would argue that a one to two times valuation is very conservative. A one to two times revenue valuation parameter places CSKH shares between $0.115 and $0.23 on the solar business alone.
We reiterate our belief that Clear Skies Solar should not be valued only as a solar installation play as some additional value needs to be added to the market capitalization for the XTRAX monitoring business that recently completed technology compliance certification. This technology monitors the performance of solar and non-solar generated electricity providing accurate reporting back to either the owners of the generation facility or back to the public utilities’ smart grid systems. Smart grid technologies are very important to the future of the North American electric grid and are attracting a lot of attention among investors.
The U.S. patent for XTRAX is held by a company called Carbon 612, which is majority controlled by Clear Skies Solar. CSKH CEO, Ezra Green, has recently commented that he expects Carbon 612 to be taken public via a reverse merger. Shareholders of Clear Skies Solar will likely benefit significantly through their majority ownership position as this new Company begins trading. Therefore, we believe it would be necessary to add some valuation to the total market capitalization of Clear Skies Solar relative to this likely event.
We see shares of CSKH continuing to trade higher as these events unfold. Additionally, we like this trade on the “ cleanup” of the balance sheet alone as the vast majority of the toxic convertible debt has now either been converted or paid off. This should result in less supply of CSKH shares hitting the market at the exact time the Company is advertising its improving fundamentals. We believe this could be a formula for a significant run higher for the shares.
AI
