At roughly $0.17 a share, pay attention to Solar Integrated Roofing Corp. (OTC: SIRC). Not because of its low-priced exposure to a booming clean-energy sector but because SIRC appears to have grabbed considerable revenue-generating traction in 2022. And the better news is that guidance sets expectations for more of the same.
At sub-dollar prices, investors may think this is a typical penny stock with more ambition than ability. That’s not the case for this one. SIRC’s Q2 earnings ending June 30th surged by 746% to $66.3 million. Remember, that’s a quarterly figure, not a yearly. Few, if any, other microcap companies produce similar numbers, even on a yearly basis. But revenues aren’t the only thing growing, so is the bottom line. Net income exploded to $18.9 million in the same period or $0.04 per basic and diluted common share. That is compared to a loss of over three million and $(0.01) per basic and diluted common share in 2021.
Thus, to suggest that SIRC is operating with a revenue-generating tailwind may be an understatement. A more accurate description may be that SIRC is in hypergrowth.
Scoring Revenues With A Diversifying Strategy
While the industry is helping accelerate growth for many in the sector, not every company gets the same benefit. Those that can do, get rewarded. And SIRC checks that box. In fact, as an integrated, single-source solar power, roofing systems installation, and EV charging company, SIRC has positioned itself ideally to benefit from multiple revenue sources. That’s evident in recent updates. SIRC recently announced being awarded 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. That’s not all.
SIRC also scored 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 is expected to become an even more significant opportunity, with other hotel chains expected to join SIRC’s client list. That’s still not all.
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 be significant by unlocking new commercial scale opportunities in a niche market with a thin competitive landscape.
Know this, too. More than only operating performance is driving the value consideration. The company filed audited financial statements for the year ended December 31st, 2021, and transitioned to a more traditional December 31st fiscal year. That housekeeping positions SIRC to expedite its uplisting strategy, which is well in progress after filing to become a fully reporting company. That transition, coupled with solid performance, could help push shares on track to reclaim its 52-week high of $0.62, a more than 262% rise from current prices. Considering that SIRC is better positioned today compared to when it scored that high, reaching that mark as an initial target is more probable than not.
A Bullish Proposition Supported By Surging Revenues
SIRC management appears confident that can be the case. 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. But that was only part of the excellent news. New working partnerships and its introduction of innovative financing products positions the company to extend its streak of record-setting performances.
Again, the company isn’t projecting small numbers. Guidance suggests that as its capital position strengthens, revenues can reach upwards of $225 million in the current fiscal year. It may not stop at that level. A significant backlog, expanding revenue sources, and operating momentum could break through that lofty forecast. Now that SIRC has laid its foundation to facilitate revenues to fall faster to its bottom line, investors may be right to expect increased profitability with minimized dilution.
Moreover, an uplist to NASDAQ could be imminent, and that transition could open the door considerably to new investor interest and more traditional sources of financing. The most significant step to making that leap, audited financials, is completed. Thus, with revenues and net income performance meeting higher standards, SIRC becoming a more shareholder-friendly and transparent reporting company could happen sooner than later.
Accruing Additional Value From Partnerships
Once that happens, the revenue-generating floodgates could open. SIRC’s partnership with REPM is already putting that likelihood in play by allowing 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 part of the market opportunity.
Additional opportunities for comparable financing products are in play for the residential space as well. And by having an inherent ability to capitalize on markets that have been historically challenging to break into, SIRC is not only positioning to exploit a massive market opportunity from the consumer level but also positioning to reward shareholders in the process. Record-setting revenues and earnings generally usher in higher share prices.
Indeed, performance indicates that’s likely. And heading into the end of Q4, few argue against SIRC being better positioned than ever to maximize near and long-term market opportunities. They entered Q3 with a revenue-generating tailwind and a management team that can deliver results from an expanding product portfolio. Leveraging only the intrinsic value from its nationwide sales presence makes that probability a near-term likelihood. But there’s more than intrinsics in play.
Its team can tap into the inherent potential of its assets. And that’s where valuation models could help justify a potentially significant move higher. Most recently, SIRC named Stefan Abbruzzese as its new president, an operations and commercial leader with decades of experience. But that’s not all he provides. He’s said to be an expert in securing funding to make businesses bigger faster. And not only is he a proven capital-raiser, but he is known to do it in a way most friendly to shareholders, expected to translate into accretive growth with less dilution to grow and move SIRC’s business pipeline. Supported by impressive revenues and income, that expertise, leveraged correctly, can generate significant value.
An Impressive Tailwind Into 2023
All tolled, SIRC appears to be doing more than the right things at the right time. They have positioned themselves for that trend to continue. In other words, by securing funding needs, historic performance could be the precursor of better things ahead.
Management thinks so. 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, following the leader may be a wise consideration. Remember, too, that SIRC has substance to support its optimism, enhanced by rising energy prices and government incentives driving organic growth. Furthermore, they have created a highly complementary business platform providing significant cross-selling opportunities, adding to an impressive 1H 2022 revenues of $93 million and $25 million in net income.
With momentum at its back, nationwide business coverage, a fully integrated finance and supply chain, and targeting business from a clean-energy industry worth trillions, expecting better times ahead for this microcap solar energy player are justified. And from an investor’s perspective, investment consideration is as well.
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