Having not researched this name myself yet, what is the story behind HPS? It's an old company and looking at a 10yr chart had been flat for years between $5-$10 range. Now since 2021 it went parabolic to $84 today. What changed in its business to justify such a drastic gain? Perhaps I am a bit cynical or cautious; but I am a bit hesitant being told in the past not to invest in names that have gone parabolic so quickly? At least without a significant pullback. Thanks for your insight!
Shane
HPS.A has seen rapid demand for its products, driven by custom power units that serve renewable and data center applications. With the significant rise in installation of renewable energy systems, Hammond's dry type transformers have seen significant growth. Data centres are also growing almost exponentially. Much of HPS.A's share price growth has come alongside fundamental growth. Its net profit margins have expanded from ~2% in 2015 to 9.3% currently, and its sales growth is in the 20%+ range, whereas several years ago it was in the mid-single to low double-digits. Its earnings have grown substantially as a combination of rising margins and high sales growth. We feel that its margins are sustainable, but its sales growth may see ebbs and flows, however, it continues to trade at a reasonable valuation of 16X earnings. Also, as small caps approach $1B market cap (very close now) a whole new group of investors tends to look at a stock, and this can drive up valuation even though everything is the 'same' as before. New investors don't care what it did before--they see a debt free company growing nicely with improving margins and strong momentum.