PFIE Earnings report

Profire Energy Reports Record Financial Results for Fiscal First Quarter of 2015

http://finance.yahoo.com/news/profire-energy-reports-record-…

Shame, I had planned to add to my position today but price will probably be up.

3 Likes

Shame, I had planned to add to my position today but price will probably be up.

I wouldn’t worry about this run up it too much. I think there’s still a lot of room to run here. It looks like a nice quarter - revenue growth of 80%+ and despite the fact that they’re leveraging up operations, they still managed to increase profitability.

I continue to like this company and think they are well positioned for future.

Jason
Long PFIE

4 Likes

I would not hesitate to add to this stock, even with today’s wonderful earnings report and subsequent 11% run up. 5 years from now you will not regret it. Here’s why.

I live smack dab in the middle of the oil patch in West Texas. From what I am observing daily and after talking with folks daily who are in the know, you need not worry about the immediate future of the oil industry. It will continue to be robust for at least several more years. In fact, we are experiencing an oil boom I’ve never seen the likes of in 40 years. Our economy is red hot and people are moving to this oil country by the tens of thousands from all over the country. I see no end to it for the foreseeable future.

Why is that significant for our little powerhouse, PFIE? Because they are in the business of cleaning up. This ever more regulated business area will experience even more tighter restrictions for pollution control. PFIE is very proficient at what they do and have shown an ability to help oil companies meet ever growing regulations.

In a nutshell the macro picture is excellent, indeed.

This is a high conviction stock for me.

Jim

Long PFIE

10 Likes

I did end up adding some PFIE at $3.96 and $4.00.

Saul

1 Like

I live smack dab in the middle of the oil patch in West Texas. From what I am observing daily and after talking with folks daily who are in the know, you need not worry about the immediate future of the oil industry. It will continue to be robust for at least several more years. In fact, we are experiencing an oil boom I’ve never seen the likes of in 40 years. Our economy is red hot and people are moving to this oil country by the tens of thousands from all over the country. I see no end to it for the foreseeable future.

You may well be right, but I don’t find those reasons persuasive at all. Booms are usually like that - nobody sees an end to it until it is (suddenly) reached. Does working on production give insights into demand? It can be particularly hard to see the end from inside the boom.

1 Like

So as not to be confused DrilerJim is a dentist.
BGM

2 Likes

I hadn’t even noticed the name, but I can see how it might have looked like I had. :sunglasses:

The post I was responding (reacting?) to was written as someone surrounded by the industry, but not of it. That is how I took it; if my post gave any other impression it was unintended.

RHinCT,

I am not trying to persuade you to purchase PFIE. I just wanted to assure this board that this oil patch economy is extremely fertile for young and upcoming aggressive well managed companies to grow rapidly in…and it will remain so for the foreseeable future.

I have lived through 3 booms and 2 busts. And it is all predicated on the price of a barrel of oil. History has proven the wisdom of not betting against the price of oil or the stock market moving inexorably upwards long term. The IEO (International Energy Outlook) projects that world energy consumption will grow 56% by 2040. Since 1920 the world’s consumption of natural gas and oil has increased each year up to present day.

I have lived through 3 booms and 2 busts. History has proven the wisdom of not betting against the price of oil or the stock market moving inexorably upwards long term.

Will there be another oil bust? You bet! Will there be another stock market crash? You bet! We live in an uncertain world. But that would never stop me from investing in it. History has proven the wisdom of that.

Best wishes and good luck,

Jim

2 Likes

Shame, I had planned to add to my position today but price will probably be up.

Hi Saul,

Only up .03 today. I own this a bit higher but am thinking that it can’t perform much better and I think they have a long runway. If anyone knows something I don’t please pass it along but right now I have a 1% position and looking to move that to 2% and at these prices. (Sure I could have bought it 2 weeks ago under $4 but I didn’t and c’est la vie.)

Any comments on the viability of this company?
Mykie

This is a high conviction stock for me.

Thanks Drillerjim!

Perfect timing. I just posted that I wanted to double my position on this stock and was looking for comments and then I read yours.

For me, after reading their quarterly performance, I thought this is too good to be true and for that vague fear, I hesitated. Empirical evidence is what I was missing and you provided it.

Nice company.
Mykie

You may well be right, but I don’t find those reasons persuasive at all. Booms are usually like that - nobody sees an end to it until it is (suddenly) reached. Does working on production give insights into demand? It can be particularly hard to see the end from inside the boom.

  • Rhinct,

    Are you saying the gas/oil boom we are going through in this country is NOT going to last 2 more years? You do know they have just passed a law allowing gas to be exported and that KMI just bought back their LP’s so they could borrow more money to build out more gas pipelines? Wouldn’t that assume the people in the know (besides Drillerjim) think this boom is going to last?

    Just looking for the other side to the argument before plunking down my money.
    Mykie

  • Are you saying the gas/oil boom we are going through in this country is NOT going to last 2 more years?

    I have no opinion on that, one way or the other. I claim no expertise in the oil industry (and damned little in investing!). What I noticed was the the opinions referenced were (other than the Fool making the post) were all people involved in the industry. I believe is that the greatest influences on the industry are external; that means they can not be predicted by studying the industry, and that expertise in the industry does not necessarily apply when predicting the course of those external influences. In other words, the view from “smack dab in the middle of the oil patch in West Texas” is only part of the picture.

    2 Likes

    Mykie,

    I love this company’s prospects for a number of reasons…#1 being the phenomenal and unprecedented growth of new wellhead sites in the Permian Basin alone where we live.

    Here are my other reasons:

    —They are the industry leader with no one even close and only 5% of the potential market has been penetrated.

    —North American has become the #1 energy producer in the world.

    —The average well produces $50,000 to $100,000 a day. The cost of a typical Profire auto re-light burner unit is only $2000 to $3000. Manual re-light burners can go dark for days until workers find that the non functioning well needs relighting.

    —Profire covers only a small portion of the North American market today but has doubled its sales force recently and is aggressively opening new office in Texas, Oklahoma, North Dakota, and Pennsylvania.

    —IF CURRENT GROWTH CONTINUES at a conservative PE of 20, a price target of $10 and a potential growth of over 100% from current price is likely for the near term (12-18 months).

    Jim

    1 Like

    —They are the industry leader with no one even close and only 5% of the potential market has been penetrated.

    Jim,

    Thanks for your post on this. In looking at your “other reasons”, I did not know that the first one (above) is fact. Can you share your research that PFIE is the industry leader? What are the other companies providing similar solutions and what are their sales, products, and capabilities compared to PFIE?

    Thanks.

    Chris

    Great questions, Chris.

    The computer technology PFIE develops is a paradigm shift from the manual systems of having to constantly relight burner systems. Manual relighting is dangerous and has caused a number of deaths in the oil patch. Increased regulatory pressures may force companies to invest in this technology. Failure to relight burners is very costly to energy producers if left dark for even a day.

    The following article addresses industry peers and relative financial comparisons in a chart at the bottom:

    http://www.redchip.com/assets/reports/PFIE_FactSheet_2014042…

    An interesting interview with the CFO of ProFire is contained in the following link:

    http://www.redchip.com/company/home/PFIE

    American Growth Stocks has a nice overview of the position PFIE holds in this tiny energy niche:

    http://americangrowthstocks.blogspot.com/2014/03/profire-ene…

    Conclusions:

    They increased revenues over 100% YoY. They are debt free and have approximately 6 million in cash. They’ve doubled their salesforce this year and are in the very early stages of penetrating the explosive growth of natural gas in North America.

    Jim

    7 Likes

    Jim, some interesting statistics on PFIE from that first link to the Red Chip article. It’s only up to the first quarter but very impressive indeed.

    Saul

    TTM Revenue up 105.6% yoy
    TTM Gross Profit up 93.2% yoy
    TTM Operating Income up 430% yoy
    TTM Operating Margin up 16.65 pts
    TTM Net Income up 345.1%
    TTM Net Margin up 9.30 pts
    TTM Gross Margin down 3.53 pts

    Insider Ownership 73.4% (great)
    Institutional Ownership 0.0% (also great, plenty of room to grow.

    Cash $5.7 million
    Debt $0.0 million

    ROE 36.2%

    6 Likes

    Saul,

    Thank you for highlighting the financial statistics.

    To further answer Chris’ perceptive question of what is the value of PFIE relative to peer competition:

    Value Proposition:

    PFIE has shown tremendous growth relative to its peers, and we (Red Chip) expect the Company to continue to grow rapidly, with anticipated revenue growth of approximately 120% and net income growth of approximately 400% in FY14E. Given PFIE’s historical and expected future growth, its strong execution of its U.S. expansion plan, and the expansion of overall U.S. oil and gas wells, we believe it is appropriate to value PFIE at approximately the median P/E of its peer group. Applying a 30.0x forward P/E multiple to Profire’s estimated forward diluted EPS of $0.21 would give PFIE a share price of $6.20.

    Yes, a rather impressive growth picture. And as you further highlight, there is nothing wrong with 73.4% insider ownership!

    Jim

    2 Likes

    Thanks, Jim.

    PFIE has shown tremendous growth relative to its peers, and we (Red Chip) expect the Company to continue to grow rapidly, with anticipated revenue growth of approximately 120% and net income growth of approximately 400% in FY14E. Given PFIE’s historical and expected future growth, its strong execution of its U.S. expansion plan, and the expansion of overall U.S. oil and gas wells, we believe it is appropriate to value PFIE at approximately the median P/E of its peer group. Applying a 30.0x forward P/E multiple to Profire’s estimated forward diluted EPS of $0.21 would give PFIE a share price of $6.20.

    PFIE just raised about $20M in a secondary offering. If you recall, some of the shares were sold by existing shareholders so the company added 4.5M shares to the outstanding amount. Since the offering closed on July 2, the share count as of the last 10-Q does not yet reflect this dilution. There will be about 53M shares now. PFIE has guided net income (after tax) for FY15 between $7M and $9M so let’s take the midpoint of $8M. This calculates to EPS of $0.15 for FY15 which ends 3/31/2015 and using a forward P/E of 30x the share price calculates to $4.50, not $6.20. Sure, I think there’s a good chance that PFIE may beat their own forecast.

    2 Likes

    …some interesting statistics on PFIE… It’s only up to the first quarter but very impressive indeed. Saul

    TTM Revenue up 105.6% yoy
    TTM Gross Profit up 93.2% yoy
    TTM Operating Income up 430% yoy
    TTM Operating Margin up 16.65 pts
    TTM Net Income up 345.1%
    TTM Net Margin up 9.30 pts
    TTM Gross Margin down 3.53 pts

    Insider Ownership 73.4% (great)
    Institutional Ownership 0.0% (also great, plenty of room to grow.

    Cash $5.7 million
    Debt $0.0 million

    ROE 36.2%

    That was only up to the first quarter, as I noted. Here are the same statistics up-to-date, that is including the June quarter.

    TTM Revenue up 102.8% yoy
    TTM Gross Profit up 115.2% yoy
    TTM Operating Income up 157% yoy
    TTM Operating Margin up 4.96 pts
    TTM Net Income up 150.5%
    TTM Net Margin up 2.86 pts
    TTM Gross Margin up 3.24 pts

    Insider Ownership 62.9% (great)
    Institutional Ownership 9.8% (also great, plenty of room to grow).

    Cash $21.0 million
    Debt $0.0 million

    ROE 34.2%

    3 Likes