On Thursday, American Superconductor's stock took investors by surprise.
For the second consecutive quarter, American Superconductor (AMSC, up 2.76%), operating under the name AMSC, surprised investors with their financial report released Wednesday afternoon. They surpassed expectations in earnings and raised their projections. Consequently, their stock soared 22.8% by 10:40 a.m. ET on Thursday.
Heading into the final quarter of 2023, analysts anticipated that this firm specializing in connecting renewable energy sources to electrical systems would incur a loss of $0.02 per share, with revenue of only $37.1 million. However, AMSC reported an almost imperceptible profit of $0.05 per share (although technically not actual due to accounting reasons) and sales exceeding predictions with $42 million.
AMSC Q1 Performance
Unfortunately, not all the figures were favorable. The perceived $0.05 profit sparking analyst excitement was actually a pro forma figure. When calculated according to standard accounting principles (GAAP), the company actually registered a loss of $0.05 per share. Yet, the improvement in Q4 could not be denied, with sales growth of 32.5%, grid revenue increasing by 21%, and wind revenue more than doubling.
Remarkably, the cost of goods sold and operating costs rose only 13% and 19% respectively, significantly lower than revenue growth. This led to a substantial rise in gross profits, a substantial decrease in operating losses, and a substantial reduction in net losses to $0.05 per share.
Should I buy AMSC stock?
Despite ending 2024 with a loss of $0.37 per share (a significant improvement from the $1.26-per-share loss in 2023), the company still anticipates continued losses in Q1 2024, with revenue projected to remain between $38 million and $42 million and a forecasted loss of another $0.05 per share.
However, the shrinking loss despite the lower revenue suggests a positive trend in profit margins. Consequently, while AMSC may not be an immediate buy, it is at least moving in a favorable direction.
After surpassing financial expectations and reporting an almost imperceptible profit, investors began considering opportunities for future investing in AMSC. Despite the company anticipating continued losses in Q1 2024, the shrinking loss despite lower revenue indicates a positive trend in profit margins, making AMSC stock a potential investment for those looking for companies moving in a favorable financial direction.
