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Solar Integrated Roofing Corporation (OTCPK:SIRC) is growing through acquisitions at a fast pace. If management receives sufficient funds from investors, and the acquisitions don’t fail, sales growth could stay at more than 20% YOY. Assuming that Solar Integrated reaches the size of competitors, in my view, the EBITDA margin will increase as economies of scale increase. In the best case scenario, the fair price could be significantly larger than the current share price. I do see some risks coming from impairment of goodwill, intangibles, and potential equity dilution. So, the stock is not for everybody, but I am a buyer.
Solar Integrated Roofing
Solar Integrated Roofing Corporation is a single-source solar power and roofing systems installation business. The company is trying to build a diversified portfolio of assets across solar, battery backup, EV charging, roofing, and related HVAC/electrical contracts.
The most interesting feature about Solar Integrated is the ability of management to acquire other competitors. The number of acquisitions signed in the last two years is overwhelming, which, in my view, most financial advisors will likely appreciate. Keep in mind that the company will likely report significant revenue growth thanks to inorganic growth.
As a result of Solar’s M&A activity, its number of installations per state increased significantly in 2021 and 2020. In my opinion, the company did not really install new systems, but acquired new ones. In any case, most investors will be interested in Solar Integrated because it is reporting significant sales growth.
In the nine months ended November 30, 2021, Solar reported revenue of $66.1 million, close to 400% more than that in the same period in 2020. The gross profit also increased quite a bit, and the amount of salaries and wages more than doubled. Already with positive net income, I believe that the demand for the stock could increase from 2022.
The figures reported from 2017 to 2020 were quite detrimental. The company did not only report negative EBITDA margin and negative net income, the total amount of sales was also quite small. That’s why I believe that the stock is currently trading a bit undervalued. Many investors may not be looking at the new numbers because the old figures were not that encouraging.
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