Over the past six months, American Superconductor’s shares (currently trading at $30.29) have posted a disappointing 14% loss while the S&P 500 was down 1.9%. This might have investors contemplating their next move.
Following the drawdown, is now a good time to buy AMSC? Find out in our full research report, it’s free.
Why Are We Positive On American Superconductor?
Founded in 1987, American Superconductor (NASDAQ:AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.
1. Skyrocketing Revenue Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, American Superconductor’s sales grew at an incredible 28.4% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers. 
2. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, American Superconductor’s margin expanded by 23.6 percentage points over the last five years. American Superconductor’s free cash flow margin for the trailing 12 months was 11.6%.
3. New Investments Bear Fruit as ROIC Jumps
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, American Superconductor’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.
Final Judgment
These are just a few reasons why we think American Superconductor is a high-quality business. With the recent decline, the stock trades at 56.7× forward P/E (or $30.29 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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