Tecogen Inc. (TGEN – $2.43) designs, manufactures and sells industrial and commercial CHP (Combined Heat & Power), or cogeneration, systems that produce combinations of electricity, hot water, and air conditioning. It’s a well-established Company that has already shipped over 2,500 units, some of which have been operating for more than 25 years.
Revenue in the third quarter, ended September 30, 2017 was $8,501,198 compared to $6,616,455 for the same period in 2016. An impressive surge of 28.5% in top line revenue and also the highest quarterly revenue ever in the Company’s history.
Tecogen also successfully returned to profitability in Q3. The Company has now been profitable during four out of the past five quarters, with the second quarter of 2017, in which it completed the American DG Energy transaction, being the exception.
The revenue contribution of American DG Energy allowed the Company to maintain profitable despite a decline in product sales. Having this new steady flow of revenue makes it easier for Tecogen to remain profitable despite the ups and downs of product shipments. Additionally, the Company continues to improve ADGE’s fleet operations and profitability.
The Company has a number projects under way in the fourth quarter that should help to sustain its momentum going into 2018. For example, it will roll out an update of the Tecopower CHP unit, upgrade the chiller manufacturing capacity, and update some internal software systems to improve the operational efficiency.
Moreover, Tecogen keeps a close eye on upcoming state approvals for new indoor growing facilities. Indoor agriculture continues to be a rapidly emerging new opportunity for growth, particularly for the Tecochill line of natural gas powered chillers. To-date, Tecogen has inked nine transactions in the space, all but one of which is to buyers who intend to grow cannabis.
An additional driver for growth is Tecogen’s expanding base of relationships with leading Energy Service Companies (ESCOs). Tecogen was contracted to perform feasibility and design studies for over one megawatt worth of new projects with a leading ESCO.
These projects are on track and actual equipment orders are expected in early 2018. Tecogen is in negotiations with another leading ESCO for upwards of 900 kW of CHP projects. Lastly, the Company is working with a project financing group on several large projects initially projected to be over two megawatts in total.
The decline of Tecogen’s stock price following the release of the financials, creates a tremendous buying opportunity.
Based on the intrinsic value of Tecogen’s shares derived from our model, we reiterate our buy recommendation for Tecogen Inc. with a price target of $8.41, which is 246% above today’s stock price.
|Download the third quarter 2017 Tecogen Inc. Company Report.|
|Smallcaps.us Advice: Buy||Price Target: $8.41||Latest Company Report (pdf)|
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