European Expansion and Margin Growth Ahead for EuroSite Power
EuroSite Power Inc. (EUSP – $0.82) installs, pays, owns, operates and maintains highly efficient low carbon technologies such as natural gas fueled Combined Heat and Power (CHP) units, chillers, and heat pumps.
Potential customers opt for EuroSite Power’s solutions for several reasons. First, its systems operate at up to 90% efficiency, versus less than 33% for the existing power grid.
Second, customers benefit from a reduction in their energy bills without the capital costs and risks associated with owning and operating a CHP system.
In addition, by simultaneously providing electricity, hot water and heat, CHP systems have a positive impact on the environment as they reduce carbon dioxide or CO2 production.
Finally, reliability is enhanced with a CHP unit because the customer also remains connected to the electric grid. Therefore, if the grid experiences failure, it won’t result in a power outage.
The four “pillars of growth”, which EuroSite Power recently announced, and which are extensively described in this report, have laid the foundation for the Company’s success in coming years, as they will have a very positive effect on its growth potential and gross margins.
Moreover, the Company recently adopted a new measurement and verification program, which will be useful in ensuring only select higher margin projects are pursued. As a rule, EuroSite Power targets an internal rate of return (IRR) on investments of over 20%, producing a payback period of just over four years.
With a growing number of CHP systems in operation, EuroSite Power gets closer to becoming cash flow positive. According to the management team, it needs 45 operating units to achieve that feat, while it has 36 contracts signed today. Making it an ideal time for investors to get on board.
Based on the intrinsic value of EuroSite Power’s shares derived from our model, we reiterate our buy recommendation for the Company with a price target of US$2.51, which is 206% above today’s stock price.
|Download the third quarter 2015 EuroSite Power Company Report.|
|Smallcaps.us Advice: Buy||Price Target: $2.75||Latest Company Report (pdf)|
|For important disclosures, please read our disclaimer.|