Valence Technology (VLNC) posted mixed results late last week and traders didn’t react much keeping the stock above its 50 day moving average and the bullish uptrend off the August lows intact. The company beat on the EPS side posting a loss of .01/share (vs the estimate for a .02/share loss), but the revenue number missed with the company reporting $13.8 million vs the $15 million analyst estimate. The good news is that the company is squeezing more profit out of revenues with gross margins improving greatly over the year ago quarter from 12% to 20%. The company may be on track to post a profit in 2012.
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“Valence again posted considerable top and bottom line improvements during the third quarter. These improvements were due to increased sales to customers such as Smith Electric, Segway, and Howard Medical. The commercial fleet sector remains a strong component of our business, but we also continue to experience increased sales in the marine, industrial, and healthcare sectors. Regardless of market segment, we believe the power and safety of our patented lithium magnesium phosphate combined with years of on-the-road fleet experience offers Valence customers performance and reliability they can trust,” commented president and chief executive officer Robert L. Kanode.
For next quarter the company expects revenue in the range of $13 – $15 million which is shy of the analyst consensus estimate of $16.7 million and for the year expects revenue in the range of $45 – $47 million (vs the estimate for $47 million)
Valence experienced good top-line growth and margin improvment. The company successfully diversified its product offering and has repositioned itself within the profitable fleet and marine revenue streams. Current key customers have continued to order additional units. Additionally, debt terms have been renegotiated to Q1 2012 maturities and effectively budgeted into a breakeven to positive cash flow.
Management is moving the company in the right direction. They are also only one to two major contracts away from material profitability. This coupled with the fact that the company’s IP holds a value of $1.50 – $2.00 / share (at a conservative measure per my research) also suggests the comapany is undervalued based on current and future prospects.