Electrovaya Inc. (TSX:EFL) is a Canadian producer of Lithium Ion SuperPolymer batteries and energy storage/transportation products. The company’s stock went on a massive rally in 2016, with an investor presentation that outlined impressive forward guidance for the company’s production and sales targets moving forward.
This presentation released in the summer of 2016 highlighted sales execution guidance of $356 million for the three year period 2016-2018, with $180 million in sales expected to be executed in 2017 alone.
Q1 2017 revenues came in at $1.1 million.
Electrovaya has reported disappointing revenue numbers over the most recent quarters, and indications are that it may take the company longer than indicated to bring its prototypes into full-scale production to meet the self-imposed targets management has set.
Additionally, the German plant that Electrovaya was paid $9 million to acquire in 2015 (pretty good deal huh?) has, as recently as Q4 of last year, been shown to be largely idle, with a highly-touted separator line not in operation. The fact that this plant is still largely sitting idle may not be a huge surprise to investors, as the company reported inventories of $17 million on revenues of $1.1 million for the past quarter.
Over-exuberance in setting forward guidance is one thing, but when regulators take notice is when many investors begin to get antsy. In November of last year, due to an Ontario Securities Commission review, Electrovaya was forced to restate some material facts made in press releases throughout 2016, further indicating to the market that the forward guidance provided was exaggerated.
As a cautious investor with a long-term perspective, it appears to me that Electrovaya has a long way to go toward becoming a viable business. With insiders still holding more than half of the company’s shares, I believe the price of EFT stock is significantly overvalued.
