Solar Integrated Roofing Corp. (OTC: SIRC) is an intriguing company and stock. And part of the reason is that from a revenue and income perspective, many investors would say its stock price might be more fairly represented at midcap levels. The disconnect there is that it's not.
Strangely, despite expectations to post over $200 million in revenues this fiscal year and dropping a good chunk of that to its bottom line, SIRC is currently priced at roughly $0.18. And at that level, many feel that number falls well short of appropriately valuing this ambitious deal-making solar and clean energy company. Incidentally, for those liking to gauge past results as a meter for the future, SIRC isn't exclusively a forward-looking proposition. Its 1H/2022 revenues reached $93 million, and the better news is that revenue growth appears to be accelerating.
In Q2 ending June 30th, SIRC posted a revenue increase of 746% to $66.3 million. Keep in mind that's a quarterly figure, not a yearly one. That's important to note because few other peer solar companies, if any, are producing similar numbers, even on an annual basis. Still, while impressive, soaring revenues only tell part of the story. SIRC's net income also surged, posting $18.9 million in the same period, or $0.04 per basic and diluted common share. That's compared to a loss of over three million and $(0.01) per basic and diluted common share in 2021.
Those numbers alone can justify a higher price. But, for those wanting more substance, there's plenty more to appreciate.
Managing Accelerating Top And Bottom Line Growth
Foremost is that current performance signals that SIRC's momentum is likely to continue. That results from this integrated, single-source solar power, roofing systems installation, and EV charging company positioning itself to perform better than ever in 2023. That message is substantiated by recent updates, with SIRC announcing a 5-year blanket purchase agreement with the U.S. General Services Administration as part of the $5 billion in federal funds allocated to EV charging installations in the Biden Administration's Infrastructure Bill. But that's not the only value driver.
Solar Integrated Roofing also inked a deal with AED to assist with developing and financing turnkey alternative energy systems for multiple existing hotel locations, targeting revenue-generating opportunities associated with solar, battery storage, and EV charging solutions. That deal could become an even more significant opportunity, with SIRC mentioning that other hotel chains are likely, and expected, to join its client list. Yes, there's still more intrinsic value to factor into the appraisal.
SIRC also introduced an innovative low-income solar financing product to non-profit commercial entities through a partnership with Renewable Energy Products Manufacturing. That deal can unlock new commercial scale opportunities in a niche market where SIRC could exploit a thin competitive landscape. While all the above supports a value investment proposition, SIRC investors could also benefit from corporate transitions.
More specifically, SIRC announced filing audited financial statements for the year ended December 31st, 2021, and transitioning to a more traditional December 31st fiscal year. That change positions SIRC to expedite its uplisting strategy, which is underway after making the requisite filings to become a fully reporting company.
Performance Supports The Interest
Of course, operating performance matters to investors, and SIRC checks those boxes. They noted in Q2 commentary that the quarter's performance was marked by a strong cadence of continued execution that included record revenue and profitability. That bullish tone was only part of an excellent update. Also highlighted were new working partnerships and the introduction of innovative financing products that position SIRC to extend its streak of impressive top and bottom-line growth.
The company isn't forecasting small numbers, either. Guidance suggests that as its capital position strengthens, revenues could continue to hit record levels in the current fiscal year. And, with a foundation in place to facilitate revenues falling faster to its bottom line, investors may be correct to expect increased profitability with minimized dilution. The current sector rally certainly fortifies that presumption. Leading the bull run are companies like SolarEdge (NASDAQ: SEDG), Enphase (NASDAQ: ENPH), and First Solar (NASDAQ: FSLR), which are all appreciably higher since October. Notably, as expected, sector optimism appears to be trickling down to smallcaps, bringing more exposure to the sector smallcaps, SIRC included, and helping send their share prices higher by exposing their valuation disconnects and opportunity.
And with an expected NASDAQ uplist imminent, in addition to new investor interest swelling, doors to more traditional financing sources can also be opened. Incidentally, the most significant step to making that leap, audited financials, is completed. Thus, another milestone reached could be in the crosshairs. And it could become a catalyst.
Partnerships Can't Be Under-Appreciated
Why? Because that uplist can strengthen its revenue-generating momentum even further by opening new market opportunities, some through partnerships, that could push SIRC's growth pace into hyper speed. For example, SIRC's partnership with REPM will allow them to introduce new financing products to help non-profit customers install and realize the benefits of solar with no upfront costs, no credit threshold, and no income verification needed to qualify. That's just one of the revenue streams the company plans to tap into.
SIRC expects to seize other opportunities for comparable financing products for the residential space, leveraging its inherent ability to capitalize on markets that have been historically challenging to enter. In that respect, SIRC is positioning itself to take advantage of underserved markets by making its products available at the consumer level and meeting potentially significant untapped demand.
Recent updates show that SIRC is ideally positioned to capitalize on and meet those challenges. Remember, they entered Q3 with a revenue-generating tailwind and a management team able and proven to deliver results. By the way, investors need to value more than the intrinsic; they need to factor in the inherent potential of SIRC's portfolio assets.
That's where analyst valuation models come into play to forecast and justify a fairer valuation. SIRC's new President, Stefan Abbruzzese, could be instrumental in attracting analyst attention, noting his industry experience and expertise as an operations and commercial leader. He's also an expert in securing shareholder-friendly funding to make businesses grow bigger, faster. Knowing that fresh capital is the lifeblood of growth companies, that ability could prove timely, with any capital raised, if needed, helping to accelerate accretive growth with less dilution.
1H/2022 Growth With A Tailwind Into 2023
Keep in mind that investors aren't the only ones bullish on SIRC's potential. David Massey, SIRC CEO, said, "We're looking to wrap up our funding process … and get cashflow positive. We're very close to that now, and we're looking to really blow the doors off the revenue this year," He added, "Looking forward, 2023 could be twice as good as 2022."
Thus, sometimes it's best to follow the leader. After all, they tend to have more operating visibility than investors. So, pay attention when one says that the next year could double the prior. Seldom do CEOs want to overpromise and underdeliver. And remember this specific to SIRC: there is substance to support its optimism. Whether benefiting organically from rising energy prices and government incentives or scoring new partnerships to boost its revenues, SIRC has the assets in place to capitalize on and maximize its near-term market opportunities.
So, while 2022 may be record-setting, a more appropriate calculation of the SIRC value proposition going forward may be best stated in a relatively simple way; recent record-setting performance may be the precursor to better times ahead. And, if so, expect SIRC's $0.18 price tag to become a launchpad instead of a hangout.
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