BUSINESS
Flux Power Holdings, Inc., through its subsidiary Flux Power, Inc., designs, develops, manufactures, and sells lithium-ion energy storage solutions for lift trucks, airport ground support equipment, and other industrial and commercial applications in the North America. It offers battery management system (BMS) that provides cell balancing, charging, discharging, monitoring, and communication between the pack and the forklift. The company also provides 24-volt onboard chargers for its Class 3 Walkie pallet packs; and smart wall mounted chargers to interface with its BMS. The company sells its products directly to small companies and end-users, as well as through original equipment manufacturers, lift equipment dealers, and battery distributors. Flux Power Holdings, Inc. is headquartered in Vista, California.
INVESTMENT RATING
FLUX is expected to be a major Value Builder reflecting capital returns that are forecasted to be above the cost of capital.
Flux Power Holdings has a current Value Trend Rating of F (Lowest Rating).
The Value Trend Rating reflects complementary signals from PTR’s two proprietary measures of a stock’s attractiveness. Flux Power Holdings has a slightly negative Power Rating of 31 and a very low Appreciation Score of 9, producing the Lowest Value Trend Rating.
Flux Power Holdings’ stock is selling significantly above targeted value. The current stock price of $5.20 compares to targeted value 12 months forward of $1.
Flux Power Holdings’ very low appreciation potential results in an appreciation score of 9 (91% of the universe has greater appreciation potential.)
Flux Power Holdings has a Power Rating of 31. (FLUX’s slightly negative Power Rating indicates that it only has a higher likelihood of achieving favorable investment performance over the near to intermediate term than 31% of companies in the universe.)
Factors contributing to this slightly negative Power Rating include: FLUX’s earnings estimates have fallen very significantly in recent months; the Miscellaneous Electric Machinery, Equipment, Supplies comparison group is currently in an unfavorable position; and recent price action has been neutral.
INVESTMENT PROFILE
FLUX’s financial strength is poor. Financial strength rating is 2.
Relative to the S&P 500 Composite, Flux Power Holdings Inc has moderate Value characteristics; its appeal is likely to be to Capital Gain-oriented investors; the perception is that FLUX is higher risk. Low financial leverage is a positive for FLUX. Relative weaknesses include: low historical profitability, low financial strength, high stock price volatility, low expected growth, and low historical growth. FLUX’s valuation is high: low dividend yield, high P/E ratio, and high price/book ratio. FLUX has unusually low market capitalization.
CURRENT SIGNALS
Flux Power Holdings’ current operations are eroding. Return on equity is falling, reflecting: declining pretax margin; and falling leverage.
Flux Power Holdings’ current technical position is very strong. The stock price is in a 3.3 month up move. The stock has appreciated 55.6% from its prior low. The stock price is above its 200 day moving average which is in an uptrend.
ALERTS
Flux Power Holdings Inc (NASDAQ: FLUX) has benefited from notable positive changes in investment behavior: the stock rose on very heavy volume.
In light of this we are reviewing our current Overall Rating of F. This review will be completed in the next several days.
On 2/14/24, Flux Power Holdings Inc (NASDAQ: FLUX) stock enjoyed a major increase of 18.7%, closing at $5.20. Moreover, trading volume in this advance was exceptionally high at 402% of normal. The stock has performed in line with the market over the last nine months and has risen 19.0% during the last week.
CASH FLOW
In 2023, Flux Power Holdings generated a very significant increase in cash of +$1.89 million (+391%). Sources of cash were much larger than uses. Cash consumed from 2023 EBITDA totaled -$4.51 million. 2023 non-operating sources contributed no cash. In 2023, there were no cash taxes paid. Withdrawal of investment from the business totaled +$0.11 million (-2% of EBITDA). On a net basis, debt investors supplied +$3.93 million (-87% of EBITDA) while equity investors supplied +$2.35 million (-52% of EBITDA).
Flux Power Holdings’ Non-operating Income, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by an uptrend for the Flux Power Holdings Peer Group. In most years, Flux Power Holdings was in the second quartile and top quartile. Currently, Flux Power Holdings is slightly below median at -0% of EBITDA ( $0.00 million).
Flux Power Holdings’ Cash Taxes, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by stability for the Flux Power Holdings Peer Group as well. In most years, Flux Power Holdings was in the second quartile and top quartile. Currently, Flux Power Holdings is slightly below median at 0% of EBITDA ( $0.00 million).
Flux Power Holdings’ Business Re-investment, %EBITDA has enjoyed a very strong overall uptrend over the period. This improvement was accompanied by a similar trend for the Flux Power Holdings Peer Group. In most years, Flux Power Holdings was in the second quartile. Currently, Flux Power Holdings is slightly above median at -2% of EBITDA (+$0.11 million).
Flux Power Holdings’ Debt Investors, %EBITDA has experienced a volatile overall downtrend over the period. This downtrend was accompanied by a similar trend for the Flux Power Holdings Peer Group. (Since 2021 Debt Investors, %EBITDA has accelerated very sharply.) In most years, Flux Power Holdings was in the second quartile and lower quartile. Currently, Flux Power Holdings is substantially below median at -87% of EBITDA (+$3.93 million).
Flux Power Holdings’ Equity Investors, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Flux Power Holdings Peer Group. (Since 2021 Equity Investors, %EBITDA has experienced a very sharp recovery.) In most years, Flux Power Holdings was in the third quartile and second quartile. Currently, Flux Power Holdings is slightly below median at -52% of EBITDA (+$2.35 million).
Flux Power Holdings’ Change in Cash, %EBITDA has experienced a downtrend over the period. This downtrend was accompanied by an opposite trend for the Flux Power Holdings Peer Group. In most years, Flux Power Holdings was in the second quartile and lower quartile. Currently, Flux Power Holdings is substantially below median at -42% of EBITDA (+$1.89 million).
Flux Power Holdings’ Cash, %Revenue has suffered a volatile overall downtrend over the period. This downtrend was accompanied by a similar trend for the Flux Power Holdings Peer Group. In most years, Flux Power Holdings was in the third quartile and lower quartile. Currently, Flux Power Holdings is lower quartile at +4%.
PROFITABILITY
Flux Power Holdings’ return on equity has eroded very significantly since 2014. The current level is -79.2% versus the high of 548.3% and the low of -98.4%.
The productivity of Flux Power Holdings’ assets rose over the full period 2014-2023: asset turnover has enjoyed a very strong overall uptrend that accelerated very sharply after the 2021 level.
Flux Power Holdings’ return on equity is lower quartile (-79.2%) for the four quarters ended December, 2023.
Operating performance (pretax return on assets) is substantially below median (-15.5%) reflecting asset turnover that is upper quartile (1.71X) and slightly above median pretax margin (-9.1%).
Tax “keep” rate (income tax management) is at median (100.0%) resulting in after tax return on assets that is substantially below median.
Financial leverage (leverage) is upper quartile (5.10X).
GROWTH RATES
Overall, Flux Power Holdings’ growth rate has slowed considerably in recent years.
Flux Power Holdings’ historical income statement and balance sheet growth are not available.
Annual revenue growth has been 30.7% per year.
Total asset growth has been 22.1% per year. (More recently it has been 6.7%.)
Annual E.P.S. growth is not available.
Equity growth has been -22.7% per year.
No consensus growth rate forecast is available for Flux Power Holdings.
Relative to the Flux Power Holdings Peer Group, Flux Power Holdings’ historical growth measures are highly erratic. Revenue growth (30.7%) has been upper quartile. Total asset growth (22.1%) has been substantially above median. Equity growth (-22.7%) has been lower quartile. E.P.S. growth is unavailable.
Consensus growth forecast is unavailable.
PRICE HISTORY
Over the full time period, Flux Power Holdings’ stock price performance has been volatile and significantly below market. Between April, 2013 and February, 2024, Flux Power Holdings’ stock price fell -88%; relative to the market, this was a -96% loss. Significant price moves during the period: 1) April, 2022 – February, 2023: +197%; 2) December, 2020 – April, 2022: -87%; 3) August, 2020 – December, 2020: +187%; 4) July, 2019 – April, 2020: -53%; 5) August, 2018 – May, 2019: -58%; and 6) December, 2017 – August, 2018: +525%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of -15.8% is lower quartile relative to the S&P 500 Composite.
In addition to being lower quartile relative to S&P 500 Composite, current annual total return performance through January, 2024 of -15.8% is slightly above median relative to Flux Power Holdings Inc Peer Group.
Current 5-year total return performance of -22.1% is lower quartile relative to the S&P 500 Composite.
Through January, 2024, with lower quartile current 5-year total return of -22.1% relative to S&P 500 Composite, Flux Power Holdings’ total return performance is substantially below median relative to Flux Power Holdings Inc Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, FLUX’s overall valuation is normal. Price/equity ratio is upper quartile. Ratio of enterprise value/assets is near the upper quartile. Ratio of enterprise value/revenue is lower quartile. Price/earnings ratio is unavailable. Ratio of enterprise value/earnings before interest and taxes is unavailable.
Relative to Flux Power Holdings Peer Group, FLUX’s overall valuation is quite high. Price/equity ratio is upper quartile. Ratio of enterprise value/assets is upper quartile. Ratio of enterprise value/revenue is above median. Price/earnings ratio is unavailable. Ratio of enterprise value/earnings before interest and taxes is unavailable.
Flux Power Holdings has a very large value gap compared to the median. For FLUX to achieve median valuation, its current ratio of enterprise value/revenue would have to fall from the current level of 1.59X to 1.16X. If FLUX’s ratio of enterprise value/revenue were to fall to 1.16X, its stock price would be lower by $-2 to $4.
For FLUX to achieve upper quartile valuation relative to the Flux Power Holdings Peer Group, its current ratio of enterprise value/revenue would have to rise from the current level of 1.59X to 2.24X. If FLUX’s ratio of enterprise value/revenue were to rise to 2.24X, its stock price would increase by $3 from the current level of $5.20.
VALUE TARGETS
FLUX is expected to be a major Value Builder reflecting capital returns that are forecasted to be above the cost of capital.
Flux Power Holdings’ current Price Target of $2 represents a -71% change from the current price of $5.20.
Flux Power Holdings’ very low appreciation potential results in an appreciation score of 9 (91% of the universe has greater appreciation potential.)
Reinforcing this low Appreciation Score of 9, the moderately low Power Rating of 31 contributes to an Value Trend Rating of F.
Flux Power Holdings’ current Price Target is $2 (+213% from the 2023 Target of $0 but -71% from the 02/14/24 price of $5.20). This dramatic rise in the Target is the result of a +13% increase in the equity base and a +177% increase in the price/equity multiple. The forecasted decline in growth has no impact on the price/equity multiple and the forecasted increase in cost of equity has no impact either. However, the forecasted increase in return on equity has a huge positive impact.
PTR’s return on equity forecast is 27.3% — substantially above our recent forecasts. Forecasted return on equity erratic but little changed between 2015 and 2023. The current forecast is significantly above the 2015 low of 4%.
PTR’s growth forecast is 5.0% — significantly below our recent forecasts. Forecasted growth enjoyed a dramatic, variable increase between 2015 and 2023. The current forecast is significantly below the 2022 peak of 47%.
PTR’s cost of equity forecast is 16.3% — above recent levels. Forecasted cost of equity exhibited a modest, erratic decline between 2015 and 2023. The current forecast is well above the 2015 peak of 7.7%.
At Flux Power Holdings’ current price of $5.20, investors are placing a positive value of $3 on its future investments. This view is not supported by the company’s most recent performance that reflected a growth rate of 31.0% per year, and a return on equity of 4.0% versus a cost of equity of 6.8%.
PTR’s 2025 Price Target of $2 is based on these forecasts and reflects an estimated value of existing assets of $3 and a value of future investments of $-1.
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