The last ten days have seen the share price of Digital Power Corporation (NYSEAMERICAN:DPW) soar and reverse in quick succession with the former having significantly more weighting.
The above was seen when the company’s share price rose from $.6 to highs of up to $3.5 in the same week, nearly six times the opening value. As such, the company has been trading within quite a large margin this week, a factor which has made it difficult for investors to clearly forecast how the next day’s price will be.
The price, however, came back down towards the close of yesterday to end at $1.38, movement which can be seen as a reversal in the company’s share price by some. Others don’t see it that way as they believe that this only goes to postulate the company’s value creation abilities going forward.
All the above have led us to look into the company and establish the real story as given by the fundamentals from the market’s sentiments. This piece will seek to paint a picture on the real outlook of DPW going forward and explain the drivers of such a view.
Before then, have a look at the price action in the charts below:
DPW Daily Chart
DPW: An Overview
Here is a brief overview of the company for the sake of first time readers.
Digital Power Corporation was founded in 1969 and is headquartered in Fremont, California. They design, develop, manufacture, and sell power system solutions for the medical, military, telecom, and industrial markets in North America and Europe.
However, courtesy of a restructuring process that took place in September this year, the company is now incorporated in Delaware and set a holding company, DPW Holdings Inc which would be the umbrella body that governs their operations. Moreover, they would be venturing into different industries through a vertical integration strategy they opted to follow in a bid to grow into the future.
They currently have about four subsidiaries and have a market capitalization of $28 million.
Developments
Key in these developments is their wholly-owned subsidiary, Coolisys Technologies Inc.
Coolisys Technologies Inc is a technology-centric holding company which is dedicated to servicing the defence and aerospace sectors as well as industrial and medical based businesses worldwide.
Back in September, Coolisys completed the purchase of all outstanding membership interest in Power-Plus Technical Distributors LLC giving them controlling interests in the company as well as selecting a new Vice President.
Power Plus Technical Distributions LLC, headquartered in California, has been in existence for the past 26 years, providing tailor-made solutions to businesses by transforming standard off-the-shelf power supplies into fully tested, plug-and-play power systems. The company which has so far grossed in over $2 million in revenues (as at 2016) and over $400,000 in EBITDA and distributing over 350 products nationally seemed like a great move for DPW which would leverage on their experience to benefit both financially and strategically through vertical integration.
According to the President and CEO of Coolisys, Amos Kohn:
“Power-Plus has an extensive network of customers and commercial relationships that we look forward to building… We are also very excited to establish the Power Solutions Group… in our efforts to leverage the synergies available between the three key business units and the industry expertise, design knowledge and engineering talent Bill Gordon has demonstrated while growing Power-Plus. Establishing the Power Solutions Group will support our strategy to focus on full custom and value-added power system solutions to the markets we service.”
This was only the beginning for them.
They further went on to receive two customer recurring orders for their custom switching power solution it has developed for cloud based data centres and for powering converged cable TV edge router and gateway nodes that supports the continuing exponential demand for cloud based computing services.
The move which was hailed by the company’s CEO goes a long way in speaking to the company’s high-quality products as well as the performance of the personnel within it.
A lot of great news seems to be coming from them in the recent past.
Finally, the company’s other wholly-owned subsidiary, Digital Power Lending LLC is working at the acquisition of I.AM, Inc, a hospitality group based in Las Vegas, Nevada.
The move which will cost DPW dearly, including over $1.05 million which they have raised through a financing option, is expected to increase DPW’s revenues by between $9 and $10 million and their EBITDA by about $900,000 going forward.
All the above speak to one thing, a futuristic outlook, one that DPW clearly has and is working at boosting long into the future.
Financials
This seemed to have been the catalyst to the share price movement of DPW.
Their revenues went up 77% in the third quarter to close the period at $3.2 million, up from $1.8 million. The surge was a signal that their operations were paying off with activities such as marketing playing a key role here.
Despite the above, the company closed the period at a loss of $1.99 million. This was, however, lower than the previous loss position of over $2 million. Moreover, their working capital position still remained negative through this period as did their operating cash flows.
This is all watered down by their $1.43 million in investments which means that the company is sticking to its strategy: growth through investments. All these are expected to pay off quite soon.
The market will therefore soon be seeing the rise in the price of DPW quite soon, a rise which is expected to hold long into the future.
Conclusion
DPW is growing at an amazing rate. With the 77% jump in revenues signaling all that is about to happen, the market should be aware of the continued price surge that is expected of DPW.
We will be updating our subscribers as soon as we know more. For the latest updates on DPW, sign up below!
Image courtesy of MariaCarla F via FlickrDisclosure: We have no position in DPW and have not been compensated for this article.
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