Tecogen Inc. – Solid Grower with Billion Dollar Opportunity

Tecogen Inc. (TGEN – $3.68) designs, manufactures and sells industrial and commercial CHP (combined heat and power), or cogeneration, systems that produce combinations of electricity, hot water, and air conditioning. The main drivers for end users to opt for a CHP system are a significant reduction in energy costs, a potential governmental incentive, and the fact that it provides a safe and reliable backup in case of a utility grid blackout.

With an installed base of more than 2,300 machines, Tecogen is a well-established and respected Company in the industry. Its revenues continue to grow thanks to both increased product sales and recurring service activity. Revenue for the most recent trailing four quarters is at record levels.

In addition, the backlog at the end of the third quarter grew to $11 million, in line with the Company’s goal of consistently delivering quarter-end product backlog greater than $10 million.

Moreover, Tecogen has a solid balance sheet with close to US$4 million in cash at the end of the September quarter.

There are vast market opportunities for CHP units with customers that include hospitals, colleges and universities, health clubs and spas, hotels and motels, food service and multi-unit residential buildings, etc.

Next to three types of CHP systems, the Company also markets the Ultera low emissions technology, which dramatically reduces an engine’s emissions. In fact, thanks to Ultera, CHPs can now meet the strictest emission regulations worldwide. More recently, with the Volkswagen emissions scandal in mind, Tecogen started researching if Ultera can be applied to gasoline fueled engines. First results look promising. Any breakthrough in the billion dollar automotive industry immediately puts Tecogen in another category.

Based on the intrinsic value of Tecogen’s shares derived from our model, we issue a buy recommendation for the Company with a price target of US$8.87, which is 141% above today’s stock price.

Download the third quarter 2015 Tecogen Inc. Company Report. Download

Smallcaps.us Advice: BuyPrice Target: $9.41Latest Company Report (pdf)
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