Topic: Growth Stocks

Why this green energy stock’s new technology could revolutionize renewable power

There’s no limit to the types of investment questions Inner Circle members can ask me and my team of investment experts. Members often ask us about the best ways to profit from specific trends in society. For example, we’ve gotten more questions from members about green energy stocks as concern for the environment has risen.

An Inner Circle member recently asked for our recommendation on Electrovaya Inc. This green energy stock’s lightweight batteries can be used in renewable-energy projects and hybrid cars. To give you a sense of how the Inner Circle works, I’d like to share this question, and our answer, with you. I hope you enjoy and profit from it.

Q: Hello Mr. McKeough: Recently there has been interest in Electrovaya Inc., which has signed an agreement to provide batteries to Chrysler. What is your opinion on this stock? Regards.

A: Electrovaya Inc., $2.06, symbol EFL on Toronto (Shares outstanding: 70.9 million; Market cap: $175.2 million; www.electrovaya.com), has developed a “SuperPolymer” lithium-ion battery technology. The company believes its super thin, lightweight batteries have a higher energy density than competing rechargeable batteries.

The company began operating in September 1996. It first applied its technology to batteries for portable computers and similar devices. It also makes a tablet computer with an LCD screen on which users can write using a special-purpose pen, or stylus.


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Chrysler deal caused a big jump in this green energy stock’s share price

In 2002, the company switched its focus to developing batteries for hybrid and electric-powered vehicles. In March 2010, Chrysler agreed to test the green energy stock’s batteries in its new plug-in hybrid electric vehicles in various environments over the next three years. The announcement caused the stock to jump from around $0.75 to $4.46. It has since settled back to its current $2.06.

Besides car batteries, Electrovaya is developing batteries that can store electricity for electrical-power companies. Storing electricity for later use would help make renewable-energy projects, like solar panels and wind farms, more feasible.

In the three months ended December 31, 2010, Electrovaya’s revenue jumped 142.9%, to $2.2 million from $920,000 a year earlier (all amounts except share price and market cap in U.S. dollars). However, losses rose to $455,000, or $0.01 a share, from $244,000, or nil per share.

Electrovaya’s long-term debt of $5.0 million is a low 2.8% of its market cap. It holds cash of $8.5 million, or $0.12 a share. The company is using up its cash at a rate of around $125,000 per quarter, so it has enough to continue to develop its products. Electrovaya spent 19.0% of its revenue on research in the latest quarter.

The company’s products have promise, and its association with Chrysler gives it credibility. However, it faces strong competition from larger firms with more resources.

Our buy/sell/hold advice on Electrovaya, based on our outlook for green-power demand and the prospects for its lithium-ion battery technology, is only available to members of our Inner Circle. You can’t get it anywhere else! (Note: If you are a current Inner Circle member please click here to view Pat’s recommendation. Be sure to log in first.)

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