TPS Position Update – September 1, 2015

. . . . ASECENT SOLAR TECHNOLOGIES (NASD: $ASTI) – Sell 

Two weeks ago we were patient.  But the time has come to take our losses and move on.

We have reconsidered the Q2 earnings growth, which we looked on favorably, and the harder we look, the more convinced we are this level of growth will be difficult to sustain.

But here’s our primary concern.  Ascent management hasn’t given us a good reason to believe that expenses will be significantly reduced, something that needs to happen sooner rather than later.

It’s not just the recent downturn in the market, and the slide in the price of the stock, that has prompted our decision to sell.

(Over the past month, Ascent’s stock price has slid from $0.22 to $0.12.)

More significantly, along with cost reductions, the company’s prospects for global revenue have suffered.  An agreement with the Chinese city of Suqian in Jiangsu Province has fallen apart.

This agreement was for a joint venture for the construction of a manufacturing facility.

The loss of this agreement could be significant as Ascent looks for ways to lower its production costs.  Exiting this deal has already cost the firm $320,000.

We still like Ascent’s products and its flexible thin-film photovoltaic modules.     We’ll continue to keep an eye on the company, and specifically, the progress it makes growing revenue and cutting expenses.

But to preserve our capital, which can be better used elsewhere, we are recommending a sell.

. . . . US GEOTHERMAL INC. (NYSE: $HTM) – Hold

On the surface, the news out of Boise is not good.

U.S. Geothermal lost $234,000 in its second quarter.

But on closer inspection, we see a highly encouraging sign.

Gross margins grew dramatically, from 3.61% to 15.21% compared to the same quarter last year.

Does this mean we’ll see more to come, even healthier margins down the road from the renewable energy exploration company?  It’s clearly difficult to maintain this kind of growth, but if margins show modest growth, or even hold steady, the firm’s financial health could improve significantly.

The Q2 loss was fairly modest, less than 1% on a per-share basis.

Q2 revenue was $5.9 million in the period.

U.S. Geothermal expects full-year revenue in the range of $29 million to $33 million.

Right now, the stock is trading well above its 52-week low of $0.38, close to its high of $0.63.

Action To Take

• Sell ASECENT SOLAR TECHNOLOGIES INC. (NASD: $ASTI)
• Hold U.S. GEOTHERMAL (NYSE: $HTM)

Category: TPS Update