TPS Trade Alert – July 1, 2013
July 1, 2013
Recommendation:
Buy Lightbridge (NASDAQ: LTBR) up to $1.95 per share.
Trade Rationale:
From an investors’ standpoint, the energy sector can be quite interesting. Not only are there various types of industries to invest in, but there are several different layers to those industries.
Are you going to invest in oil or solar power (or both)? If you like oil, do you want to buy an oil producer or an oil pipeline?
Moreover, there are many complimentary businesses supporting or directly impacting energy industries. For example, picture a semiconductor company which makes more efficient components for a solar panel. The company may not produce the panels themselves, just a particular component or two.
One energy industry which doesn’t get as much airtime as the others is nuclear power.
Nuclear plants are still an important source of energy in the US. And, because of how efficient nuclear power is, it should continue to be an important fuel source for years to come.
That’s why we really like what Lightbridge (NASDAQ: LTBR) has to offer.
LTBR is a leading provider of nuclear fuel technology and services. The company’s technology segment develops proprietary nuclear fuels. The consulting segment provides strategic advisory services to commercial and government entities.
While Lightbridge currently derives most of its revenue from consulting, its future success is dependent on its proprietary fuel technology.
You see, the company creates metallic fuel rods which have several benefits over traditional rods. Essentially, LTBR’s rods operate at a significantly lower temperature. That means they last longer, they’re easier to cool, and they’re safer.
Break those benefits down for nuclear utilities and you’re talking about higher revenues, higher margins, and increased competitiveness over existing products. It’s hard to argue with those kinds of improvements.
What’s more, LTBR estimates investment in nuclear new builds to top $1.5 trillion by 2030. So, not only can the company’s fuel technology improve existing plants’ efficiency, but there’s a whole new slew of reactors on the horizon.
Management expects full fabrication of the metallic rods to take place in the 2013-2014 time frame. In the meantime, consulting and advisory services provide fairly consistent revenues.
To be more specific, LTBR is generating roughly $3 million in revenues per year. It may not seem like a lot, but it’s enough to keep the company operating while developing its nuclear fuel technology.
As you’d expect, the company is not yet profitable. For instance, last quarter, LTBR’s net loss was $1.3 million on revenues of $0.5 million. Clearly, those numbers will change dramatically once the fuel technology product is in production.
Plus, LTBR does have a strong balance sheet.
The company’s sitting on $3.2 million in cash compared to zero debt. That works out to current assets at an impressive 11x current liabilities. More importantly, the company should be sufficiently funded to reach the fuel production stage.
Here’s the thing…
It’s difficult to value a company like Lightbridge which hasn’t yet begun accumulating revenues on its primary product. However, the company’s technology has been validated by credible industry third parties. And, it’s a clear win for any existing or new nuclear utility.
Really, it should just be a matter of time. The company’s market cap is only around $21 million right now. That could easily be its annual revenue once its metallic fuel rods are in production.
And with no debt and plenty of cash, LTBR still has plenty of time to get into gear. Not to mention, the shares traded at nearly $4 per share in early 2012. We see no reason the stock won’t get back to that level or higher.
Now’s the chance to grab your shares in this exciting company.
Remember to use limit orders when placing your trades. And stick to your position sizing rules.
Key Facts:
| Company: | Lightbridge |
| Ticker: | LTBR |
| Recent Price: | $1.72 |
| Market Cap: | $21.6 million |
| Avg. Daily Volume: | 17,934 shares |
Chart:
Category: TPS Trade Alert
