Broadwind Inc (BWEN) shares have been surging recently due to the news of the Inflation Reduction Act (IRA) committing $369 billion in clean energy and climate action spending, including installing over 120 thousand wind turbines by 2030. This news has been driving up the stock price of BWEN and has created a great opportunity for investors to capitalize on the growing demand for clean energy technologies. The company’s core operations include heavy fabrications, welding, metal rolling, coatings, gear cutting and shaping, gearbox repair, heat treatment, assembly, engineering, and packaging solutions, all of which are highly sought after in the industry.
BWEN’s weak financials
Despite the company’s weak financial statements, the upside potential is significant and investors should capitalize on the current surge. The company’s revenue has grown by 7.6% YoY in the MRQ and its Gearing and Industrial Solutions’ revenues have grown by 37% and 43% YoY, respectively. The profitability has also improved, with the operating loss reducing 17.4% from $2.3 million to $1.9 million and Adjusted EBITDA increasing threefold from $0.1 million to 0.4 million YoY in the MRQ.
The company’s balance sheet is also weak, with a negative Altman Z score of 2.4x and its debt having risen by 54% in the last 4 quarters. However, the company recently entered into a new credit agreement with Wells Fargo to address its liquidity issues, thereby mitigating these risks.
The company is expected to significantly benefit from the IRA as the demand for clean energy components rises. However, the benefits from this demand will likely be realized by the end of next year. The company is also undervalued relative to its peers despite the recent upsurge and its 5-year revenue CAGR of negative 3.6% is also relatively low.
Given the current macroeconomic uncertainty, investors should be wary of investing in Broadwind, as the risks far outweigh the rewards. However, if the company successfully navigates these waters, they can expect to see topline growth by the end of 2023. Until then, the current surge in the stock price is a great opportunity for stockholders to cash in their profits and invest in securities with a favorable risk-reward ratio.
BWEN’s acquisitions
Broadwind recently announced that it has completed the acquisition of certain assets and business operations from O’Neal Manufacturing Services, Inc. (“OMS”). The assets acquired include OMS’ Gearing and Industrial Solutions business, which specializes in the custom design, development, and manufacture of precision gears, gearboxes, and other components for the global industrial and mobile markets. This acquisition is expected to significantly enhance Broadwind’s product and service offerings and expand its customer base.
Additionally, Broadwind announced that it has formed a strategic partnership with the National Renewable Energy Lab (NREL). Through this partnership, Broadwind will work with NREL to develop new technologies and processes related to the manufacture of wind turbine components. This partnership will enable Broadwind to develop products for the wind energy market with improved efficiency, reliability, and cost-effectiveness.
BWEN’s partnership with Wells Fargo
Finally, Broadwind recently announced that it has entered into a new credit agreement with Wells Fargo to address its liquidity issues. The agreement includes a $50 million revolving credit facility and a $90 million term loan with a five-year maturity. This new credit agreement will provide Broadwind with the necessary liquidity to pursue strategic acquisitions and investments and further strengthen its financial position.
BWEN’s $175 million dollar purchase order
Recently, Broadwind announced a receipt of approximately $175 million in new tower orders from a leading global wind turbine manufacturer. Fulfillment of the new order will occur during the full year 2023 and conclude by the end 2024. Ordered tower sections will be produced at both the Company’s Abilene and Manitowoc facilities.
In conclusion, investing in Broadwind shares is a risky venture, but the upside potential is significant. Investors should make the best of the current price surge to exit their positions and cash in their profits, investing their funds elsewhere with a better risk-reward mix.
