Best stock to invest in – Recycler Priced for Recovery | Alternative Energy Stocks



Best stock to invest in

by Debra Fiakas CFA

Shares of Appliance Recycling
Centers of American (ARCI:  Nasdaq)
has trended downward
over the last year, despite some strong fundamental progress in the
company’s position the recycling sector.  The corporate name
tells at least part of the company’s story.  Besides recycling
appliances such as washers, dryers and refridgerators, ARC also
sells new and like-new appliances right out of the box.  The
company has eighteen stores branded ApplianceSmart across
the country.  Services to electric utilities and other energy
companies related to energy efficiency programs provide yet another
revenue source.

In the twelve months ending March 2017, ARC reported $101.5 million
in total sales, providing $1.2 million in net income or $0.19 per
share.  Importantly, operations generated $2.0 million in cash
flow during this same period. The profits are a welcome improvement
over losses reported in fiscal years 2016 and 2015.  Sales had
been declining and did not fully cover operating expenses in 2015
and 2016.

Besides having a spotty track record in producing profits, ARC also
has debt on its balance sheet.  At the end of March 2017, the
company had $6.2 million in total debt on its balance sheet. 
This represented a debt-to-equity ratio of 47.52.  Debt at any
level might give some investors pause, especially if there is no
consistent profitability.

Still there are some elements in the ARC story that should interest
investors.  In April 2017, the company opened a new recycling
center in the Milwaukee area.  The company has teamed up with a
state program to recycle old kitchen appliances, cleaning up the
environment and removing unsafe, uneconomical appliances from
neighborhoods.  The company also launched new contact center
services to consumers called Customer Connexx.  The service
supports scheduling of services of local utility programs related to
appliance safety and energy efficiency.

Shares of Appliance Recycling Centers are trading below a dollar a
share, which might be off-putting for some investors.  For
those who are not shy of penny stocks, ARCI could be your
stock.  The shares are now priced at 4.2 times trailing
earnings.  There is no forward price-earnings ratio given that
the company has a limited following among sell-side analysts. 
With recent demonstration of recovery (no pun intended!), the stock
appears to be priced at a bargain.



Debra Fiakas is the Managing Director of
Crystal Equity
Research
, an alternative
research resource on small capitalization companies in selected
industries.

Neither the author of the Small Cap
Strategist
web log,
Crystal Equity Research nor its affiliates have a beneficial
interest in the companies mentioned herein.

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