American Woodmark Corporation

AMWD Details

American Woodmark Corporation (NASDAQ: AMWD) manufactures and distributes kitchen, bath, and home organizing products for renovation and new home construction. Its goods are sold directly to home centers and builders around the country and through a network of independent dealers and distributors. The company had 17 production sites in the United States and Mexico, eight key service centers, and one distribution facility scattered across the country as of October 31, 2021.

Q2FY22 Results:

• Flat Topline: AMWD reported a 1.02% increase in net sales to USD 453.16 million in Q2FY22 (ended October 31, 2021) from USD 448.586 million in Q2FY21.
• Decline in Bottomline: AMWD witnessed a decrease in net income to USD 2.03 million in Q2FY22 from USD 23.12 million in Q2FY21.
• Adequate Balance Sheet: The company's cash and cash equivalents were USD 8.01 million as of October 31, 2021, with total debt of USD 503.59 million.

Key Risk:

• Customer Concentration Risk: Customers A and B, the company's two largest customers, represented 33.1% and 18.4% of its gross customer receivables, respectively, as of October 31, 2021. Customers A and B accounted for 31.5% and 25.5% of the company's gross customer receivables, respectively, as of October 31, 2020. Such reliance on a single customer for sales could be detrimental to the company's financial stability in the future.

Outlook:

• Price Estimates: As of November 23, 2021, AMWD expects the impact of confirmed price actions to rise to over USD 50 million per quarter in the Q4FY22, compared to the second quarter's realized pricing actions assuming current sales levels.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

AMWD Daily Technical Chart

Stock Recommendation:

AMWD's share price has fallen 37.41% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 56.29 to USD 108.81. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 46.08. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 78.56.

Considering the company's market dominance, consistent track record, correction in lumber prices, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 63.54, down 0.08% as of January 11, 2022, at 11:31 AM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.

Orion Energy Systems, Inc.

OESX Details

Orion Energy Systems, Inc. (NASDAQ: OESX) offers cutting-edge light-emitting diode (LED) lighting systems, Internet of Things (IoT) enabled control solutions, project engineering, design energy project management, and maintenance services. Although it sells and deploys products in other markets, its products are aimed for usage in three key market segments: commercial office and retail, area lighting, and industrial applications. Almost all of the company's sales take place in North America.

Latest News:

• Inorganic Endeavors: Stay-Lite Lighting, a nationwide lighting and electrical maintenance service provider were acquired by OESX on January 05, 2022. Stay-Lite Lighting joins the OESX portfolio, bringing high-profile retail customers, self-performing capabilities in 15 states, and a nationwide support network. The acquisition will help OESX Maintenance, which provides Lighting and electrical services to customers, develop faster.
• Expiration of Shareholder's Rights Plan: On December 22, 2021, OESX decided to let its shareholder rights plan expire on January 07, 2022, as per its terms. The plan was implemented in January 2009 as a precautionary measure when its stock price and operating performance exposed it to hostile takeover attempts. The company's board of directors has decided that a shareholder rights plan is no longer necessary now that the company is profitable and growing steadily.

Q2FY22 Results:

• Boost in Topline: OESX reported a 38.92% increase in total revenues to USD 36.51 million in Q2FY22 (ended September 30, 2021) from USD 26.28 million in Q2FY21, due to a rise in installations from its existing large national retail customers.
• Growth in Bottomline: OESX witnessed an increase in net income to USD 3.66 million in Q2FY22 from USD 1.91 million in Q2FY21.
• Strong Balance Sheet: The company's cash and cash equivalents were USD 14.74 million as of September 30, 2021, with total debt of USD 0.04 million.

Key Risks:

• Customer Concentration Risk: One customer accounted for 66.7% of accounts receivable on September 30, 2021. Three clients contributed 33.9%, 16.4%, and 10.1% of accounts receivable, respectively, as of March 31, 2021. As a result, losing any of its key customers could harm its bottom line.

Outlook:

• FY22 Estimates: As of November 09, 2021, OESX expects to generate at least USD 150 million in revenue in FY22. After the Q3FY22, OESX hopes to understand it's potentially better to meet this goal.

Valuation Methodology: Price/Earnings Per Share Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

OESX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

OESX's share price has fallen 58.69% in the past twelve months and is leaning towards the lower end of the 52-week range of USD 3.24 to USD 11.98. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 70.55. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 5.27.

Considering the significant correction in the stock price in the past twelve months, strong balance sheet, inorganic efforts, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 4.28, up 5.16% as of January 11, 2022, at 2:09 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.