Catching Fire with Profire Energy, Inc. (PFIE)

While the stock market may seem irrational on a day-to-day basis, over the sweep of time profitable and growing companies are usually rewarded with a higher share price, while the shares of money-losing concerns usually find the sledding much tougher. That’s why I want to bring your attention to Profire Energy, Inc. (PFIE), which recently reported a blowout quarter, and whose shares should have more run left in them in the weeks ahead.

Profire Energy, Inc. designs, assembles, installs, sells, and services oilfield combustion management technologies and related products for the oil and gas industry both domestically and abroad. Its products and services aid oil and natural gas producers in the production and transportation of their products.

The company’s biggest sellers are burner management systems, which allow the end-user to manage various combustion vessels, and provide fundamental burner management functionality, such as burner re-ignition and temperature management.

Profire also markets flare ignition systems; specialized burner management systems for use in specific firetube vessels; valve train products comprising valves, valve actuators, gauges, and installation products; and other miscellaneous componentry products.

Earlier this summer, PFIE shares attracted buyers in droves, driving the stock price up to a 52-week top of $5.89 established on June 11. That run appears to have been catalyzed by the company qualifying for a NASDAQ listing, making the huge leap from the OTC market. Soon after, PFIE shares took flight following a favorable SeekingAlpha story about up-and-coming “clean tech” firms, published April 7, identifying Profire as one of the four best values in the sector.

According to that story, Profire’s ace-in-the-hole is their automated burner technology that enables remote monitoring and relighting of flames on equipment that requires a heat source. “Compliance with safety regulations is enabled because flames and heat controls are more easily managed, automatically turning off and on when heat is needed,” the author noted. “Profire Energy currently has over 20,000 BMS systems deployed; a mere 1% of the available 2 million oil and gas installations in the market.”

As almost invariably happens following the kind of parabolic run PFIE shares experienced, profit-taking kicked in from that frothy $5.89 zenith. As you can see from the chart below, that selling knocked PFIE back below $3.50 for a brief period of time.

pfie
The share price drop was exacerbated by the company’s announcement of a $4 per share public offering of 6 million shares — almost always a short-term drag on any company’s share price, given the dilutive nature of those deals. And it didn’t help investor confidence that the bull market appeared losing its steam right around the same time.

The steady sell-off in PFIE had run its course by the beginning of August, with bargain hunters first stabilizing the price in the $3.30 – $3.50 channel. Then, on August 14th, Profire reported Q2 earnings, which, on a top and bottom line basis, were quite simply outstanding.

For Q1 2015, Profire banked total sales of $13.1 million, a quarterly record, and 83% more than the comparable period last year. Net income increased 38% to $2.2 million or $0.05 per share. The company was also added to the Russell 2000, Russell 3000 and Russell Microcap indices, adding more fuel to a bullish outlook for PFIE.

Equally encouraging was company management’s highly optimistic outlook on its business prospects going forward: “As we look forward to the rest of the fiscal year, we plan to continue expanding our marketing, sales and service teams,” said CFO Andrew Limpert. “The completed expansion of our Lindon, Utah warehouse in the fall will add increased efficiency and scalability to the delivery of our products. Supported by the growing industry demand for burner management systems, we expect these efforts to lead to another year of significant top- and bottom-line growth.”

After making a quick run to about $4.20 per share in the immediate wake of that report, sellers took advantage of the gap up in price, driving PFIE back down to the $3.85 mark. However, it didn’t take long for buyers to regain control, pushing PFIE up to an intra-week high approaching $4.80 before sellers stopped the price ascent.

[mepr-rule id=”994″ ifallowed=”hide”][mepr-unauthorized-message][/mepr-rule] 

[mepr-rule id=”204″ ifallowed=”show” description=”penny_pick_elite_members_only”]
From where I sit, Profire Energy appears to be clicking on all cylinders and well-positioned to continue its success during the immediate future. Although I expect there to be some additional profit-taking from the stock’s current $4.65 trading level, I believe it’s only a matter of time before the issue once again challenges and overtakes $5 per share.
[/mepr-rule]

[mepr-rule id=”988″ ifallowed=”show” description=”executive_lounge_members_only”]
From where I sit, Profire Energy appears to be clicking on all cylinders and well-positioned to continue its success during the immediate future. Although I expect there to be some additional profit-taking from the stock’s current $4.65 trading level, I believe it’s only a matter of time before the issue once again challenges and overtakes $5 per share.
[/mepr-rule]

As always, trade this stock and all others with extreme caution.

Warren Gates, Senior Analyst, Normandy Research

Share your thoughts...

We encourage people to join in on the discussion. Please keep in mind however, that all comments are moderated according to our comment policy, and all links are nofollow. Let's keep the conversation professional and meaningful.