When I look across some of the new battery technology makers such as ELVA, EOSE, AMPX, and ENVX there are a few story stocks there, and I consider ELVA to be the only one that is not a story stock.
I like to look at the financials of a business first before even knowing what the company does to see if this is a company I would invest on financials alone. That rules out a lot of companies including EOSE, AMPX, and ENVX who are all losing huge on profitability metrics.
Electrovaya has stood out for a few reasons from the crowd. The big one being they are GAAP profitable on the last two quarters, meaning they are becoming self sustaining and unlikely to require big capital raises or dilution. Another big factor is the valuation where ELVA is 250M market cap, and the other battery makers are all 1B+ valuations with lower quarterly revenue.
I first look at ELVA two quarters ago when their revenue jumped from 11.2M to 15M which is a huge percentage jump up. They also had EBITDA go from 0 to 1.8M, and net income go from -0.4M to 0.8M.
However, I did not invest then because many times these manufacturing based companies see pull-through, or have a large order land ahead of time. It may mean they are taking revenue from a future quarter potentially. It’s when they reported again going from 15M to 17.1M, EBITDA from 1.8 to 2.4M, and net income from 0.8 to 0.9M, that got me really interested.
Additionally, their latest earnings call showed up better in the narrative aspect to me than the prior earnings report. The narrative aspect is a completely subjective take, and I may take a note that management seems more enthusiastic. To a lot of people that can sound like a naive approach, in that I would be investing just based on how something “seemed” or “sounded”.
I’m not looking to make predictions with my investment approach. Using that numbers first approach, a company like Electrovaya has already proven cost discipline, profitability and growth. I remember Saul once saying we don’t want to do “guess work” and that is something that has stuck with me. Ideally I’ll let the company’s results dictate my next moves rather than trying to predict a technological trend. I’ve been wrong on dozens of companies I’ve posted about on the board, but the consistency in the approach ends up getting strong returns.
I will add that my approach used to be a bit different some 2+ years ago, where if a company has a strong enough narrative I was willing to overlook some unimpressive financials, simply because I thought I could trust in management more. I mentioned above in this thread Saul was quite critical of Amprius and that turned out to be correct as Amprius hit project delay after project delay. They had go back for more capital raises and the stock got crushed.
It’s a hard thing to do as an investor to admit we may have some mistake in our strategy, or at least some way to improve our strategy. If we’ve been investing for awhile, it means we have been compounding a strategy mistake for years, potentially holding us back from better results. For my own mistakes, I would value the narrative or futurism aspect of the business too much, and I would sometimes make extensive industry predictions.
As for timing those other companies of EOSE, AMPX, and ENVX, I will let the numbers dictate if we should make an investment. If they are able to reach profitability with strong growth numbers, and the story checks out through the conference call, then the timing may be right.
