Aurora Solar moving in the right direction
Smaller and emerging companies have a very different lifecycle than the so-called “blue-chip” stocks that take up a disproportionate amount of media and investor attention.
For experienced and savvy investors, being able to identify the signposts in a company’s journey that signify the potential for hurried growth is not only immensely satisfying, but can bag some incredibly rewarding portfolio additions.
Aurora Solar Technologies Inc. (TSXV: ACU) (“Aurora Solar”) is certainly satisfying the checklist in terms of investable attributes.
The use case
Most sophisticated investors will tell you that the best businesses are simple to understand. Unfortunately, some sectors are technology heavy and require some technical ability, and Aurora Solar falls into this latter category. But rather than immersing yourself in the nuances of photovoltaic efficiency and crystalline silicon, you can instead ask yourself a much simpler question: is Aurora Solar solving a real problem?
The answer to this is unequivocally yes. The solar industry has been around for decades, but it is only in the last few years that the total all in-cost of producing solar technology has fallen far enough and fast enough to justify wide scale adoption without the requirement for incentives or rebates.
Get our daily investorintel update
That has put a rocket under the industry as a whole, but a set of obstinate problems remain: poor product uniformity and high rates of wastage when producing the actual solar cells. Coupled with the wafer thin margins of the sector, courtesy of huge supply increases in China, the need to reduce wastage becomes crucial to staying profitable for panel producers.
That is where Aurora Solar shines. Its sensor technology allows solar cell producers the ability to manufacture more uniform cells with lower scrap rates. As though that wasn’t enough, the non-invasive sensors also result in higher yield cells.
Put simply, less wastage, more yield. Sounds compelling, but is it actually gaining traction?
The adage goes that the first customer is the hardest, and that holds very true for early stage technology plays that are attempting to sell the story that they have a product that can improve on the existing status quo.
However, Aurora Solar has seen its revenue grow 5 times year on year, and is playing in an industry that is expecting to see sales from photovoltaic solar cells and systems reach $1.2 trillion by 2024. That’s a lot of solar cells that could be produced with lower wastage and with greater efficiency.
To that end, Aurora Solar has already begun to demonstrate another crucial signal to investors, namely, that customers are willing to pay for its products.
This is borne out by record revenues of $1.4 million achieved for the second quarter of 2017-18. The landmark revenue record was also joined by an equally significant milestone, especially for such an early stage company, with the second quarter becoming the maiden profitable quarter, with a $178,000 profit.
This is notable as it shows that the company is shareholder friendly and not in business solely to churn through millions of dollars of equity that requires frequent capital raisings. Capital raisings that are conducted for companies that can show traction, paying customers and early profits are more often put towards accelerating growth rather than “keeping the lights on”.
Compelling market dynamics
Operating in a rapidly growing industry, supported by solid macroeconomic trends, coupled with a compelling use case and evidence of traction with customers certainly earns Aurora Solar Technologies Inc. plenty of credit for an early stage company, and I would say one to definitely watch more closely.