EFL is a manufacturer of lithium-ion cells and battery systems, which are crucial for the transition to electrification of vehicles. EFL’s operating results have been good in recent quarters and the stock is now trading at 24x times' EV/EBITDA. In the 2Q, EFL’s revenue grew 144% to $10.5M, beating estimates of $10.2M, and adjusted EBITDA was $0.8M, compared to a loss of -$1,1M in the same period last year. The balance sheet is decent, with net debt of just $18M. However, the company is still burning cash, with the trailing twelve-month cash flow being negative -$8.0. Based on consensus estimates, sales are expected to grow by around 60% on average over the next few years.
Overall, EFL is currently in hyper-mode growth, profitability has been improved (adjusted EBITDA), though the company is still burning cash and it may take many years until the company can sustainably generate healthy cash flow. We would be okay entering here for high risk small cap investors only, while being mindful of its size risks. However, we consider the name to be highly volatile and would size the position appropriately.