Stock Sonar # 44 - 2/14/2024

Powell Industries (NAS:POWL) — mrkt cap $1.77B; Price $147.94; EV/EBITDA 20

PASS. We wrote about POWL in our January 17th stock sonar. We were still in our diligence phase and unfortunately the stock has run away from us on good earnings and is up almost 100% since. We believe that Powell Industries fundamentals will likely continue to do well but it is hard to underwrite the multiple with considerable cyclical exposure. To recap, POWL is a leader in custom design and servicing of electrical distribution solutions and although a large part of its business has been historically tied to the O&G sector, it has recently seen demand from the electrical infrastructure upgrade and data centers.

Everquote (NAS:EVER) — mrkt cap $508mm; Price $15.50; EV/EBITDA NA

PASS. When originally researching this name, we thought that Everquote was a comparison platform for insurance quotes. Think something like a but for insurance. Instead, Everquote is a lead-generation platform. They spend significant amounts of ongoing marketing dollars to drive traffic to their site and then turn around and sell this customer information to insurance carriers – primarily to Progressive and State Farm (~30% of revenues). For Everquote to be successful, there would need to be evidence that they are growing into a consumer brand and providing value to customers by helping them compare and save money on premiums. Furthermore, they have unsuccessfully tried to expand into different insurance verticals and are heavily weighted to the auto insurance cycle.

Cryoport Inc (NAS:CYRX) — mrkt cap $730mm; Price $14.90; EV/EBITDA NA

PASS. Cryoport Systems is a market leader in temperature-controlled supply chains for the life sciences industry. CYRX caters to the growing cell and gene therapy market which in particular needs cryogenic solutions. This market is set to grow 15% annually for the next ten years. Being the IBM of temp controlled solutions, CYRX is chosen as the defacto provider and the growth of the gene industry should accrue to CYRX. CYRX currently does not generate profits and trades at over 5x revenue. Coupled with their pro cyclical share buybacks in which they repurchased shares at almost 3x the current share price, this gives us pause. We will wait for a further drawdown before considering a position.