Aspen Aerogels Inc (NYSE: ASPN) stock is in the ascendancy on Thursday after the company said it would not proceed with a previously mooted public offering of common stock.
A release from the business said that current market conditions were not conducive to terms that would be favorable for the company’s existing shareholders. With the news that a fresh offering will not dilute Aspen’s share price, the stock price has increased by more than 15% at the time of writing.
But is Aspen Aerogels a stock worth considering?
What is Aspen Aerogels?
Aspen Aerogels is a Massachusetts-based company that designs, develops, manufactures, and sells aerogel insulation products primarily for use in the energy infrastructure and building materials markets in the United States, Asia, Canada, Europe, and Latin America.
The company offers a range of products that include PyroThin thermal barriers for use in lithium-ion batteries in electric vehicles and energy storage industries.
Other products from the company can assist operations such as power generation, energy infrastructure, refrigerated appliances, cold storage equipment, and aerospace systems.
The company was founded in 2001 and has more than 400 employees.
How Does ASPN Make Money?
The company makes its money by selling its products to manufacturers in the electric vehicle, energy storage and energy infrastructure spaces.
Revenue growth has been strong over recent periods, with the company recording a 37% year-on-year increase to $38.4m in its most recent quarter.
However, while sales figures are on the rise, costs are also increasing, resulting in Aspen’s net loss having more than tripled to $19.5m between the same two periods despite such a big uptick in revenue.
That appears to be because Aspen has made a significant investment in talent, systems, facilities and tooling in order to prepare for rising demand as electric vehicle popularity continues to grow.
This seems to be paying off too, as since its last quarterly update, the company has said it is set to upgrade to revenue expectations on the back of good order growth from Toyota and General Motors.
ASPN Stock Financials
The company has a market cap of $530.8m and total cash of $205.2m as of 31 March 2022. Meanwhile, total liabilities stand at just $159.4m.
Meanwhile, the stock’s price-to-book ratio of 2.92 is relatively low considering the potential growth of the EV and energy storage markets which it is seeking to target.
The stock price itself has plummeted this year, dropping by more than 80% since the start of January.
ASPN Growth Potential
April saw the company reaffirm its long-term targets for growth. These mainly revolve around expanding its capacity, with thermal barrier product production capabilities expected to double between 2021 and 2023 before tripling between 2023 and 2025.
Aspen anticipates this will increase its annual revenue capacity from $122m in 2021 to more than $500m in 2025.
The company has also set ambitious targets for product and manufacturing improvement, with these including a 33% cut in materials costs and improved energy density and preservation.
ASPN Stock Risks
While there’s potential, Aspen and its investors do also face their fair share of risk. Disruptions in the energy storage and electric vehicle markets would be particularly damaging for Aspen’s fortunes, given the company’s efforts to invest to take advantage of anticipated growth here.
Additionally, failures to improve the company’s products could see it superseded by competitors.
Should You Invest in ASPN?
Aspen looks like a tempting proposition for investment. The business looks to have invested smartly for the future. If it manages to secure its position as a key supplier for top players in the EV and energy storage games, the returns for investors could be fantastic.
For the company to back down from the sale of further common stock indicates that it is not necessarily struggling for money, which is another encouraging sign.
However, disruption in the EV or energy storage markets could pose real difficulties for the company, considering how much money it has sunk into expanding capacity and product improvement.
It’s far from a sure bet, but Aspen looks like it is worth a glance if you’re looking to buy into the EV boom while stock prices are so low.
