Tecogen Becoming Profitable Boosts Valuation
Tecogen Inc. (TGEN – $4.35) 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, as it has already shipped over 2,300 units, some of which have been operating for almost 25 years.
During the third quarter, ended September 30, 2016, Tecogen generated net income of $207,868 compared to a loss of $948,842 in the third quarter of 2015. The first positive net income in the Company’s public history. The outstanding performance was achieved by a solid revenue increase, combined with strict cost control, which resulted in gross margin rising to 41.9%.
Becoming profitable is always a major turning point at a company. It’s no different at Tecogen. But let’s be clear, despite its significantly improved financial results, the Company has only started scratching the surface of the huge clean energy market.
We see tremendous potential for Tecogen as its management believes it will be profitable going forward, while its growth opportunities come to fruition.
One of those growth initiatives is TTcogen. During its first full quarter of operation, the joint venture made steady progress toward building product awareness and establishing relationships with key partners. Initial sales were focused around the smaller 35kw CHP system, but larger megawatt system sales are expected down the line.
A second growth driver will undoubtedly be the acquisition of American DG Energy, as it will create a Company with approximately half of total revenues from long-term contracted sources, a stable funding source for ongoing growth initiatives.
Moreover, the development of Ultera for the propane-powered fork truck market is an exciting opportunity to extend the technology into new platforms and verticals. Note that approximately 70,000 propane powered fork lift are sold annually in the United States alone.
And finally, it goes without saying that continued positive developments at ULTRATEK could be a massive game changer for Tecogen. Phase II test results will officially be announced early next year in a peer reviewed paper, but management has already indicated that they are positive.
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 $9.72, which is 123% above today’s stock price.
|Download the third quarter 2016 Tecogen Inc. Company Report.|
|Smallcaps.us Advice: Buy||Price Target: $9.41||Latest Company Report (pdf)|
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