Parameter name: request
Translate Request has too much data
Parameter name: request
Valuation Primer For Energy Storage Companies – Lesson #2 | Alternative Energy Stocks
HOME | ALL STOCKS | MUTUAL FUNDS | ETFs | WIND | SOLAR | GEOTHERMAL | BIOFUEL | BATTERY | ENERGY EFFICIENCY
SMART GRID | EFFICIENT VEHICLES | ALTERNATIVE TRANSPORT | CLEANTECH NEWS | ADVERTISE | CONTACT | ABOUT
« Hydrogenics Corp: Splitting Water | Main | Three Top Geothermal E&P Companies » Valuation Primer For Energy Storage Companies – Lesson #2 John PetersenOn November 6th I published
To follow up with the format I introduced last week, the first graph isa simple market performance comparison of the two companies over thelast year.
The second graph comes from my quarterly tracking data and compares therelative market capitalizations of the two companies since September2009.
The following table compares the balance sheet fundamentals of the twocompanies, their income statement performance over the last twelvemonths, and some important per share valuation metrics.
The final table presents A123's reported product shipments, salesrevenue, cost of products sold and unabsorbed manufacturing costs overthe last year, both as gross numbers and on a per kWh basis.
I pay special attention to reported revenue and cost data because it'sso far out of sync with happy-talk stories in the mainstream mediaabout rapidly falling lithium-ion battery prices. A successfulmanufacturing enterprise must have a spread of 20% to 30% between unitcost and unit revenue to pay operating overhead and generate a profit.With a $1,010 per kWh average unburdened cost of products sold over thelast five quarters, A123 would need to charge its customers between$1,250 and $1,450 per kWh, which is a far cry from the $500 per kWhshort-term target for electric car batteries I keep reading about.Barring a visit from the manufacturing cost fairy, I can't see howsavings of that magnitude are possible over the next few years. Icertainly haven't seen any real progress over the last five quarters.
One could argue that this week's comparison between A123 and Enersysand last week's comparison between Ener1 and Exide are unfair becausethe lithium-ion battery developers are emerging technology companieswhile the lead-acid battery manufacturers have global footprints,decades of experience and immense financial muscle. The fallacy in thatargument is that lithium-ion battery developers are trying to displacewell-established lead-acid battery manufacturers with modest formfactor advantages and immense product cost handicaps.
For the last couple of years, the mainstream media has waxed propheticon the ability of lithium-ion battery developers to slash costs andimprove performance, while dismissing the possibility that there could be anysignificant improvement in lead-acid batteries because they'vebeen around for 150 years. The reality is that lead-acid chemistry hasbeen improving at a rapid pace over the last decade and thirdgeneration devices that combine carbon nanotechnology with lead-acidchemistry promise potentially disruptive gains in cycle-life, power anddurability.
Since size and weight are irrelevant in most existingapplications, electric vehicles can't become mainstream productswithout huge battery cost reductions, and the two chemistries will becompeting for the same customer dollars, I'm convinced valuations inthe lithium-ion battery sector are at or near the peak of inflatedexpectations depicted in the following graph from the Gartner Group.
Benjamin Graham observed that in the short-run the market acts like avoting machine but in the long run it acts like a weighing machine. Asthe weighing machine works its magic, valuation multiples in thelithium-ion sector are certain to decline while valuation multiples inthe lead-acid sector remain stable or improve. Since the essence ofsuccessful investing is buying stocks when they're undervalued andselling them when they're overvalued, the message to serious investorsseems clear.
Disclosure: None.
Posted by John Petersen on November 10, 2010 03:28 AM | Valuation Primer For Energy Storage Companies – Lesson #2 advertise here
Post a comment (If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)
Name:
Email Address:
URL:
Remember personal info?
Comments: (you may use HTML tags for style) Featured CompaniesSearch This Site
Enter your search termsWebAltEnergyStocksSubmit search form Subscribe to this Blog
Enter your email address:
Delivered by FeedBurner
Subscribe by RSS Feed
Twitter Headlines
Categories About Biofuels Biodiesel Ethanol Biomass Waste-to-Energy Books, Reports, Webcasts & Podcasts Clean Transportation Coal-to-Liquids Electric Grid Energy Efficiency Energy Storage Batteries Flywheel Hydrogen Environmental Markets Featured Companies Fuel Cell Geothermal Hydro Industry General Interviews Microturbine Misc Mutual Fund & ETF News Ocean Power Peak Fossil Energy Plug-in Vehicles Policy Polls Pollution Control Portfolio Power Production Solar Solar Photovoltaic Solar Thermal Strategy The Week in Cleantech Wind Archives November 2010 October 2010 September 2010 August 2010 July 2010 June 2010 May 2010 April 2010 March 2010 February 2010 January 2010 December 2009 November 2009 October 2009 September 2009 August 2009 July 2009 June 2009 May 2009 April 2009 March 2009 February 2009 January 2009 December 2008 November 2008 October 2008 September 2008 August 2008 July 2008 June 2008 May 2008 April 2008 March 2008 February 2008 January 2008 December 2007 November 2007 October 2007 September 2007 August 2007 July 2007 June 2007 May 2007 April 2007 March 2007 February 2007 January 2007 December 2006 November 2006 October 2006 September 2006 June 2006 May 2006 April 2006 March 2006 February 2006 January 2006 December 2005 November 2005 October 2005 September 2005 August 2005 July 2005 June 2005 May 2005 April 2005 March 2005 February 2005 January 2005 December 2004 November 2004 October 2004 September 2004 August 2004 July 2004 
Powered By MType 3.2 Florist One Alma
0 comments:
Post a Comment
Note: Only a member of this blog may post a comment.