Hello ardethan,
You say: " I have to say, Echelon is one of those shiny pebbles I've never quite gotten. They have something to do with automated houses, right?"
The second sentence is accurate, I suppose, but not germane to how and why Echelon is beginning to make money at an ever-increasing rate. The company has been in business a little over 10 years, earned their first operating profit in Q4 of 2001, will be solidly profitable in 2002 and, perhaps, showing mega-growth for a long, long time.
Echelon has developed a control technology which operates under an open, interoperable system and allows communication over power lines, rf, copper pairs, and the internet. It is applicable to residential, industrial, commercial buildings,and transportation. The protocol Lonworks is becoming a de-facto worldwide standard.
Their biggest contract to date is with the ENEL, the world's largest investor-owned utility which is installing Lonworks is some 30,000,000 locations in Italy. While Lonworks allows the utility to remotely read meters, it's main benefit to ENEL is to manage the consumption of power in their grid to the extent it is like having 25% more generating capacity on-line. If the system had been installed in California, there would have been no brown-outs last year.
The customers of ENEL benefit by being able to monitor and manage their individual power consumption. (even remotely, if they desire). The system called Contatore Electronico in Italy has even inspired Merloni, a major appliance manufacturer to to introduce appliances that may be rented by the use rather than purchased.
The system that Echelon is currently testing for Kaifa in China has the potential to propel Echelon to gorilla status IMO. Echelon sells at 100 times trailing earnings which were mostly derived from interest on cash in the bank and not from company operations. Analysts are estimating .40 eps for 2002 which could well prove conservative and .70 should be in the bag for 2003 on the strength of the ENEL contract. If a Kaifa contract is announced these numbers will be marked up considerably.
Even without the China contract, Echelon is cheap at today's price. 40 or so times this year's earnings which are very visible and growing at more than 150% does seem cheap to me.
Few other companies have the visibility and prospects for growth. |
