Company Overview: Ameresco, Inc. (NYSE: AMRC) is engaged in delivering clean technology and renewable energy supply solutions. The company offers consulting services, enterprise energy management services, and the sale of solar PV energy products and systems.

­­­­­­AMRC Details

Material Business Updates

Figure 1: Key Media Releases

Source: Company Reports, Analysis by Klakine Group

Historical Financial Trend:

AMRC has illustrated sustainable historical growth while keeping the value proposition intact. The operating revenues have been consistently growing since FY17 with consistent growth in normalised EBITDA. Operating revenues grew at a 14.1% CAGR (FY17 – FY21).

Figure 2: Historical Financial Overview

Source: Company Reports, Analysis by Kalkine Group

Full-Year FY21 Performance:

Figure 3: Annual Performance

Source: Company Reports, Analysis by Kalkine Group

Top 10 Shareholders:

The top 10 shareholders together form ~41.11% of the total shareholding. The Vanguard Group, Inc. and Sakellaris (George P) holds a maximum stake in the company at ~­­­8.21% and ~6.00%, respectively.

Figure 4: Top 10 Shareholders

Source: Analysis by Kalkine Group

Key Metrics:

With consistent asset developments and continued backlog build up, the company has delivered five-year revenue and gross profit growth of 13.3% and 11.4% CAGR, respectively. Working capital grew 53% to tackle supply chain disruptions, with enhanced current ratio in FY20 and FY21.

Figure 5: Key Financial Metrics

Source: Analysis by Kalkine Group

Outlook:

Figure 6: Guidance and Growth Drivers

Source: Company Reports, Analysis by Kalkine Group

Key Risks:

In H2FY21, AMRC experienced supply chain disruptions resulting in delays in material delivery to customer sites. For securing new project contracts, the company typically faces a long variable selling cycle that demands significant resource commitments with prolonged lead time before revenue realisation

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Stock Recommendation:

Performance Details: AMRC has delivered 3-month and 6-month returns of ~-8.94% and ~+0.13%, respectively. The stock is trading below the average of the 52-week high price of US$101.86 and the 52-week low price of US$40.26.

Valuation Rationale: Considering the decent working capital to counter supply chain disruptions and consistent fundamental performance, the stock might trade at a slight premium. For valuation, a few peers like Honeywell International Inc (NASDAQ: HON), EMCOR Group Inc (NYSE: EME), Comfort Systems USA Inc (NYSE: FIX) etc. have been considered.

Investment Rationale: Considering the current trend in contract build-up, decent liquidity position, consistent top-line growth, current trading levels, and potential upside, we give a “Buy” recommendation at the current market price of $67.10, as of 15 March 2022, at 10:10 AM, New York Time.

Markets are currently trading in a highly volatile zone due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

AMRC Daily Technical Chart (Source: REFINITIV)

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.