TPI Composites Stock: Major Chart Breakout due to Biden’s Green Plans

TPI Composites stockTPI Composites Inc Surging as Result of Green Energy Focus

Green energy stocks have been sizzling since Joe Biden won the presidential election in November. In a direct contrast to former President Donald Trump, President Biden is expected to be extremely bullish on green energy. Biden’s administration has already extended tax credits to some alternative energy sectors.

With the push for green energy (and the jobs that come with it), companies like TPI Composites Inc (NASDAQ:TPIC), a maker of composite wind blades for wind projects worldwide, will likely see accelerating demand.

The market enthusiasm for green energy after Biden’s win is reflected in the price of TPIC stock, which has doubled since the election.

While TPI Composites Inc has returned impressive gains, this might only be the start, especially if the green energy focus and Biden’s decision to rejoin the Paris Agreement pick up steam.

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And while wind power is generally discussed less than solar power, the global building of wind farms is massive.

Major Breakout by TPIC Stock

TPI Composites stock has been languishing, however. On March 19, 2020, it was trading at $9.19, devoid of any technical strength.

TPIC stock displayed a bullish golden cross pattern in June, and that was followed by a steady upward move toward $30.00 by November. With Biden’s election win and the expectations related to that, TPI Composites stock rapidly broke higher to $33.00 and $45.00, followed by a spike to $71.80 on January 13, 2021.

Chart courtesy of StockCharts.com

While the easy gains have been made, TPIC stock continues to have above-average upside potential under the Biden administration.

Considering that TPI Composites stock is technically overbought in the near term, I feel there’s an opportunity on the horizon to consider the stock on price weakness.

Revenues to Accelerate for TPI Composites Inc

A look at TPI Composites’ five-year revenue picture shows it more than doubling its revenues from 2015 to 2019, with double-digit growth in three out of four years. 2019 saw record revenues and a compound annual growth rate (CAGR) of 25.2%.

Fiscal Year Revenues Growth
2015 $585.9 Million N/A
2016 $754.9 Million 28.9%
2017 $955.2 Million 26.5%
2018 $1.0 Billion 7.8%
2019 $1.4 Billion 39.5%

(Source: “TPI Composites Inc,” MarketWatch, last accessed January 22, 2021.)

Looking ahead, TPI Composites is expected to increase its revenues by 15.1% to $1.7 billion in 2020, followed by a conservative 7.9% to $1.8 billion in 2021. (Source: “TPI Composites, Inc. (TPIC),” Yahoo! Finance, last accessed January 22, 2021.)

Along the way, TPI Composites has generated positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in each of the past five years. The EBITDA growth rate was ahead of revenue growth in each year except 2018.

Fiscal Year EBITDA (Millions) Growth
2015 $39.0 N/A
2016 $56.0 43.5%
2017 $91.8 63.9%
2018 $51.2 -44.3%
2019 $76.5 49.6%

(Source: MarketWatch, op. cit.)

On the bottom line, the company needs to deliver some consistency in terms of generally accepted accounting principles (GAAP) diluted earnings per share (EPS).

Fiscal Year GAAP Diluted EPS Growth
2015 -$0.05 N/A
2016 $0.48 1,030%
2017 $1.11 131.5%
2018 $0.15 -86.8%
2019 -$0.45 -405.6%

(Source: MarketWatch, op. cit.)

TPI Composites Inc’s GAAP loss is expected to continue at $0.57 per diluted share in 2020, before staging a strong rally to GAAP profits of $1.57 per diluted share in 2021. (Source: Yahoo! Finance, op. cit.)

The company produced positive free cash flow (FCF) in three straight years, prior to producing negative results in 2018 and 2019. Look for a return of positive FCF as revenues and profitability pick up in 2021.

Fiscal Year FCF (Millions) Growth
2015 $4.9 N/A
2016 $23.3 373.1%
2017 $29.8 27.6%
2018 -$56.0 -287.9%
2019 -$17.3 69.0%

(Source: MarketWatch, op. cit.)

Analyst Take

Institutional investors love TPIC stock; 299 institutions hold shares.

Given its price acceleration, TPI Composites stock is no longer cheap. It trades at 43 times its consensus 2021 earnings-per-share estimate. But based on sales, TPIC stock trades at an attractive 1.4 times its consensus 2021 sales estimate.

Moreover, TPI Composites Inc’s price/earnings to growth (PEG) ratio of 0.76 is indicative of a stock trading below its projected five-year earnings growth rate.