We look at multiple valuation multiples (Earnings, Sales, Book, and Cash Flow), the balance sheet, and the technicals when deciding if a stock might be a good value. We put much less weight on growth rates and pay more attention to whether or not the company in question is self-funding (makes money on its own) and continues to add to its assets over time. No matter what the growth rate is, the above paragraphs put the odds in favor of long-term investors if they can wait for their investments to pay off. The reason is that over time, the company’s asset base will grow, even if management isn’t the best at allocating capital. This should lead to long-term growth in sales and earnings.

To say the least, it’s not easy to find good setups that basically meet all of the above requirements. But we found Greenland Technologies Holding Corporation (NASDAQ:GTEC), which meets a lot of the above requirements. This company has always been a supplier of transmissions for forklifts, mostly in China. In late 2020, however, it moved into the EV market. Greenland’s sales, earnings, and assets (Book Multiple) are all very low. However, because the company does not have a positive cash-flow multiple, it is not making money at the moment. At the end of Q3, the balance sheet showed that the company owed $8.7 million in short-term debt and had $83.3 million in equity. This gives us a debt-to-equity ratio of 0.10, which is a very good number.

Technically, we can see that shares continue to stay close to their support line, so it will be interesting to see if the $2 level can hold.

US Investment

Suffice it to say that this is a company that will definitely benefit from the global EV tailwind (especially if the price of electric vehicles drops over time), is profitable, and has a balance sheet with no debt. Green ideas are becoming more popular around the world, so it seems likely that demand for Greenland’s (HEVI Brand) electric front loaders, forklifts, and excavators will only grow over time. In fact, the company just opened a 50,000-square-foot assembly plant in the US state of Maryland six months ago in order to meet this demand.

If we look at the company’s finances, we can see that it has made $94.6 million in sales over the last four quarters and $7.5 million in operating income. Even though sales went up a lot in fiscal 2021, both the top and bottom lines haven’t changed much in the last few quarters. As was mentioned earlier, Greenland’s net profit of $4.9 million over the past four quarters did not lead to a positive operating cash flow (TTM of -$6 million) over the same time period. This has been a recurring problem in other quarters, which is why the company’s management raised $10 million in July of last year when shares were worth more than they are now ($4+ vs. $2.14).

HEVI Potential

Greenland is lucky in one way that the success of its transmission business can help pay for the investments needed to support its HEVI business. In fact, management thinks that the new HEVI plant in Maryland will make a maximum of 500 units per year, with the first one planned for the first quarter of fiscal year 2023. Given that the company’s market capitalization is only $27 million right now and that these machines are worth a lot of money, it’s easy to see that the value of Greenland stock would change a lot of demand for these products stays high.

To get to market in the best way possible and stand out from the competition, HEVI vehicles will now come with a Cyngn Infinitracker (GPS tracker) and will be able to charge at any of Siemens over 100,000 charging stations. Both of these ways to add value are important for customers when they are shopping. For example, Cyngn’s GPS should be a big help for customers who need to manage their fleets.

Conclusion

To sum up, Greenland’s value is still attractive, even though it has raised a lot of money in recent years. The technicals, on the other hand, show that the stock is not yet ready to go up. We’re looking forward to hearing more.

Featured Image: Unsplash

Please See Disclaimer