With a market capitalization of only $132.44 million, Ultralife Corporation (ULBI) is a relatively small player in the alternative energy space. However, the shares of this designer and manufacturer of power and communication systems have been growing at a decent rate over the past few years. The stock has rallied more than 62% over the past year to close last Thursday’s trading session at $8.28. It has also gained 62.4% over the past five years. The company received some attention after it was added to the Russell 2000 Index last June.
ULBI also recognized a $1.60 million gain in its fourth quarter (ended December 31, 2020) upon resolution of its claim in a class action lawsuit. ULBI is currently trading above its 50-day and 200-day moving averages of $7.48 and $6.66, respectively, indicating that it is in an uptrend.
Because the demand for the ULBI’s products and services should continue to rise with growing, global climate change concerns, the stock is expected to achieve fresh highs in the coming months.
Here’s what we think could shape ULBI’s performance in the near term:
Application of Products Across Multiple Industries
ULBI’s diverse portfolio of products and services are used around the world in various sectors, including government & defense, medical, safety & security, energy, industrial and robotics. In the critical arena of government & defense, its products, such as Wearable Conformal Rechargeable Battery UBBL35 and BB-2590 2.9AH Non-Class 9 Li-Ion 18650 Battery UBBL 38, among others, are used in Soldier-Worn Power for Communications. Furthermore, its 6.4V 4.5Ah (29Wh) LiFePO4 SLA Replacement Battery URB6450 and 12.8V 7.5Ah (96Wh) LiFePO4 SLA Replacement Battery URB1270 are used in energy storage. So, the company has been growing with the help of its end-market diversification strategy.
Solid Revenue and Earnings Growth
ULBI’s total revenues climbed 18.9% sequentially to $28.98 million for the fourth quarter ended December 31, 2020. Its revenues from the battery and energy products segment, which accounted for 87.3% of its total revenue, increased 15.9% sequentially to $25.29 million for the quarter. ULBI’s gross profit also increased nearly 13% sequentially and its net income for the fourth quarter was $2.11 million, up 29.6% year-over-year. Also, its adjusted EPS of $0.17 represents a 30.8% year-over-year improvement.
Reasonable Valuation
In terms of trailing-12-month price/sales ratio, ULBI’s 1.22x is 26.9% lower than the industry average 1.67x. In terms of trailing-12-month enterprise value/sales ratio, the stock’s 1.16x is also 45.8% lower than the industry average 2.15x. Also, its trailing-12-month price-to-book ratio of 1.13x is lower than the industry average 3.18x.
Favorable POWR Ratings
ULBI has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. ULBI has an A grade for Value, which is in sync with its lower-than-industry valuation ratios. It has an A grade for Momentum also. The stock has gained 28% over the past three months and 18.6% over the past month.
The stock also has a B grade for Sentiment. This is consistent with analysts’ expectations that ULBI’s revenue and EPS will grow 9.6% and 26.1%, respectively, for the fiscal year ending December 31, 2022.
ULBI has a B grade for Quality. This is no surprise given its trailing-12-month levered cash flow margin of 13.7%, which is higher than the industry average 8.1%.
Click here to see the additional POWR Ratings for ULBI (Growth and Stability).
ULBI is ranked #24 of 90 stocks in the B-rated Industrial – Equipment industry.
If you’re looking for other top-rated stocks in the Industrial - Equipment industry with an Overall POWR Rating of A or B, you can access them here.
Bottom Line
ULBI is currently flying under the radar, but its EPS is expected to grow at a rate of 17.5% per annum over the next five years. Also, the stock looks undervalued at its current price level. The increasing demand for its products and services across various industries should help the company generate massive returns in the near term. As a result, we think it could be wise to buy the stock now.
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ULBI shares were trading at $8.17 per share on Monday morning, down $0.11 (-1.33%). Year-to-date, ULBI has gained 26.28%, versus a 8.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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