Up Over 100% in 2021, is Sunworks Stock Still a Buy?

Sunworks, Inc. (SUNW) is a premier provider of high performance photovoltaic-based solar power systems. The company provides a range of installation services to its solar energy customers, including design, system engineering, procurement, permitting, construction, grid connection, warranty, system monitoring and maintenance. With the incoming Biden administration’s plans to invest $2 trillion over the next four years to build a clean energy-based future, SUNW is well-positioned to hit  new highs.

Sunworks is striving to deliver high-quality, performance-oriented solutions to customers in a wide range of industries, including agricultural, commercial, and industrial, state, and federal, public works, and residential. These efforts have helped the stock gain 870.5% over the past year.

This impressive performance combined with several other factors has helped SUNW earn a “Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates SUNW:

Trade Grade: A

SUNW is currently trading above its 50-day and 200-day moving averages of $5.81 and $2.90, respectively, indicating that the stock is in an uptrend. In fact, the stock’s 235% gains over the past three months reflect solid short-term bullishness.

Although operational limitations and challenges persisted because of COVID last year, SUNW was able to generate net revenues of $7.30 million in the third quarter ended September 30, 2020.

SUNW  signed $10 million in new commercial and agriculture projects in September 2020 that  19 existing and new customers and totaled more than 4.4 MW for installation. This demonstrates continued demand for SUNW’s solar solutions, particularly among agriculture and commercial customers.

In late November, SUNW sold approximately 3.80 million shares of common stock, raising approximately $20 million in gross proceeds. It used a portion of the proceeds to  repay approximately $2.70 million in outstanding loans from  CrowdOut Capital, Inc. The move is expected to bolster the company’s balance sheet by eliminating costly debt and strengthening their working capital position.

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Buy & Hold Grade: B

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, SUNW is well-positioned. The stock is currently trading 15% below its 52-week high of $13.35.

The company’s EBITDA has grown at a rate of 106.2% over the past year. This can be attributed to the company’s efficient business operations and expansion plans nationally with regional and local offices.

Peer Grade: C

SUNW is currently ranked #10  of 17 stocks in the Solar Industry. Other popular stocks in this industry are Polar Power, Inc. (POLA), VivoPower International PLC (VVPR) and SPI Energy Co. Ltd. (SPI).

VVPR gained 901% over the past year beating SUNW return of 870.5%. But  POLA and SPI gained 339.7% and 334.8% respectively, over the same period.

Industry Rank: C

The Solar Industry is ranked #98  of 123 StockNews.com industries. The companies in this industry are focused on designing, manufacturing, installing, maintaining, monitoring, leasing, and selling solar energy systems to residential, commercial, government, and other customers worldwide.

Growing concerns over environmental issues surrounding fossil fuels have boosted interest in renewable energy and have propelled governments to adopt green policies as a populist measure. However, seeking to capitalize on the impending revolution, the clean energy space is becoming overcrowded with emerging new entrants. Many companies are finding it difficult to sustain their operations and are burning cash and relying on public investments and debt.

Overall POWR Rating: B (Buy)

SUNW is rated “Buy” due to its impressive past performance and short-term bullishness, as determined by the four components of our overall POWR Rating.

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Bottom Line

Despite surging more than 121.8% so far this year, SUNW has the potential to grow further based on its continued business growth, favorable earnings and revenue outlook, and price momentum.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for SUNW. It has an average broker rating of 2, indicating favorable analyst sentiment. Analysts expect revenue to grow 10% year-over-year to $13.60 million in the current quarter (ending March 31, 2021).

The consensus EPS estimate for the about-to-be reported quarter (ended December 31, 2020) indicates a 91.5% rise year-over-year. This outlook should keep SUNW’s price momentum alive in the near term.

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SUNW shares fell $0.05 (-0.37%) in after-hours trading Tuesday. Year-to-date, SUNW has gained 161.72%, versus a 1.28% rise in the benchmark S&P 500 index during the same period.

About the Author: Rishab Dugar

Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More…

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