Broadwind Inc: This Cheap Green Energy Play Can Double

BWEN stockBroadwind Stock Is Way Too Cheap to Ignore

Under the guidance of Joe Biden’s administration, the green energy space will get a massive boost over the next few years. Whether it’s solar, wind, or electric vehicles, the clean energy push has been launched.

A compelling micro-cap play on wind energy and clean technology is Broadwind Inc (NASDAQ:BWEN), which has transformed from being largely focused on wind power to also focusing on applications involving clean tech.

While Broadwind should do better under the green energy push, the issue with the company has been its inconsistent fundamentals.

BWEN stock has its risk, but it can also provide huge returns if the company delivers better and more consistent results.

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Price Weakness Provides Opportunity

The below chart shows Broadwind stock staging a strong upward trendline since the sell-off in March 2020 to above its pre-COVID-19 level.

In the process, BWEN stock managed to break higher from a bullish ascending triangle in December 2020.

Broadwind stock traded at a 52-week high of $12.89 in January, but the subsequent weakening of its relative strength—coupled with a moving average convergence/divergence (MACD) sell—drove BWEN stock below its 50-day moving average and its previous resistance level just below $6.00.

Chart courtesy of StockCharts.com

At its current price, Broadwind stock has tremendous upside potential and can double if the company can finally deliver better results.

Green Energy Focus Bodes Well for BWEN Stock

Broadwind Inc’s five-year revenue picture shows inconsistencies, but there are encouraging signs, with two years straight of double-digit growth.

Fiscal Year Revenues (Millions) Growth
2016 $180.8 N/A
2017 $146.8 -18.8%
2018 $125.4 -14.6%
2019 $178,2 42.1%
2020 $198.5 11.4%

(Source: “Broadwind Inc.” MarketWatch, last accessed April 8, 2021.)

Yet with the pandemic not going away, the company’s outlook will be subject to uncertainty.

Analysts estimate that Broadwind Inc will report a 12.2% drop in revenues to $174.2 million in 2021 before rebounding by 17.2% to $204.4 million in 2022. (Source: “Broadwind, Inc. (BWEN),” Yahoo! Finance, last accessed April 8, 2021.)

The company has delivered positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in four of the last five years.

Fiscal Year EBITDA (Millions) Growth
2016 $8.8 N/A
2017 $1.6 -82.3%
2018 -$2.6 -267.9%
2019 $5.2 295.9%
2020 $6.7 30.1%

(Source: MarketWatch, op. cit.)

Broadwind Inc has yet to be consistently profitable on a generally accepted accounting principles (GAAP) earnings-per-share (EPS) basis.

Fiscal Year GAAP Diluted EPS Growth
2016 $0.02 N/A
2017 -$0.24 -1,300%
2018 -$1.56 -550.4%
2019 -$0.28 82.0%
2020 -$0.09 68.3%

(Source: MarketWatch, op. cit.)

It’s estimated that the company’s loss will rise to $0.19 per diluted share this year. But the pandemic adds to the uncertainty. The estimates range from a loss of $0.34 per diluted share to profits of $0.03 per diluted share. (Source: Yahoo! Finance, op. cit.)

Broadwind Inc is expected to be profitable in 2022, with a consensus earnings estimate of $0.17 per diluted share. The earnings estimates range from $0.07 to $0.29 per diluted share.

Another good sign has been the company’s ability to produce positive free cash flow in the last two years.

Fiscal Year Free Cash Flow (Millions) Growth
2016 $10.7 N/A
2017 -$16.0 -250.2%
2018 -$279,000 98.3%
2019 $2.7 1,060%
2020 $3.6 36.1%

(Source: MarketWatch, op. cit.)

Analyst Take

Broadwind Inc needs to deliver stronger results in order to entice investors. There are bright spots, given the green energy focus.

At its current price, BWEN stock looks extremely cheap, compared to other green energy plays, and is worth a look. The stock trades at 0.58 times the company’s consensus 2021 sales estimate and 0.5 times its consensus 2022 sales estimate.

Insiders are clearly confident about Broadwind stock. Over the last six months, insiders added 336,204 shares while selling only 5,000 shares. (Source: Yahoo! Finance, op. cit.)