Hey there. Here is a question I answered on Hammond a month ago. I did feel as if the company was way too overvalued and we'd likely see the pace slow:
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The runup has been nothing short of astonishing. Pre-pandemic this was a relatively slow growing company that really couldn't gain any traction. But in 2022 it really found its footing and has exploded. Revenue nearly doubled, earnings tripled.
The company seems to have benefitted significantly from the AI boom, at least that is the only growth segment I can figure that can deliver these types of results so quickly. It supplies a lot of custom power units that supply data center applications, which are pretty key in the AI space.
If you go to our KPI tool and look up NVIDIA, you'll be able to look up the company's data center revenue and you can see it has absolutely exploded over the last 12-18 months.
The difficulty here now is expected growth. The company has relatively little analyst coverage but the two that do cover the company are expected high single digit growth in terms of earnings and revenue next year. For a company that is trading at the valuations it currently is, if it hits those expectations its fully valued here in my opinion.
If we continue to see the trajectory we're witnessing in AI growth right now, there still could be upside here. But in my opinion the pace will slow down a bit.
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The company reported earnings a few days ago and they really weren't all that good. Revenue grew by only 11% and earnings per share declined by 50%~.
The pricing reset was likely one that needed to happen. I still view the company as a bit pricey here, but it's certainly becoming more attractive.
