EFOI< Energy Focus, An LED Tube manufacturer,

EFOI is down to $5.50/share, which is very odd for a company that has over $2.50/share in cash and a lucrative Navy contract.  They will release earnings in 3 weeks and I suspect they will be close to profitable.  I bought more today. essentially getting the company ~$3/share for a company with an enterprise value/EBITDA of 5.35 and a price to book of 1.48.  

as I see it there is limited downside risk and a potential of a double on the upside.

The big money maker for EFOI is the US Navy.  They are converting the war fleet to LEDs and EFOI is the only approved supplier.  EFOI sells to the Navy through a contractor who bought a bunch of tubes last year.  Unfortunately the warships need to be in port when the retrofits are done and the contractor over estimated how fast the conversion will take place and built up inventory in his warehouse to the point they bought very few tubes in 1Q16, punching a $7M to $10M hole in sales.  Worse the Navy is higher margin then the commercial work, so earnings took a big hit.  Looking at the previous three quarters you can see the government sales drop off.


...................3Q15...........4Q15 ........1Q16.........Change.%
QOQ
Government..$14.9M......$10.3M........$3.8M.......(63%)

Commercial...$3.5M.........$6.9M........$4.6M.......(33%)

Total............$18.4M.......$17.2M........$8.4M



Profit.............$4.3M......$1.7M.........($2.0M).... 


The average of Yahoo's analyst is $11M for 2Q16, up ~30% from 1Q16, but down $6M from 2Q15.


I am disappointed we didn't get a PR about Navy sales. I expected one. EFOI has received good news about commercial sales, 50 Kohls stores complete, another Goodyear plant and the Cleveland Clinic. My guess is $7M for commercial which, if we believe the analyst, leaves only $4M for the government. That sounds light to me I'm going to go with $6M and call it $13M for the quarter, which is higher that the highest analyst, but $4M less than the $17M the grossed in 2Q15.  They earned $0.21/share in 2Q15 and I think they'll be close to break even in 2Q16.  If you look back a few years you can see the effect of Navy bubble.

Revenue FY13 = $9.4M

Revenue FY14 = $22.7M, +141%

Revenue FY15 = $64.4M +184% in one year and 685% in two years.


Average Yahoo Analyst Estimate for FY16 = $51.4M (Note this is AFTER a sucko 1Q16 of $8.4M).  
Jimmy Tu, the CEO predicts the Navy sales will return to the $10M/quarter level by 3Q16.

As I see it there is limited down side risk and the potential for a 100% gain in the next 6 months.  One other thing.  In 2Q15 they had Millions in debt they were paying interest on.  in 2Q16, they have no debt and over $2.5M in the bank

EFOI continues to scrape the bottom range of support, giving back today's nickle gain. The company needs news or earnings to break ou.

EFOI holding +/-$4. Nio big Navy sale announcement at the end of the government's fiscal year, which is bad. Don't see a near term catalyst, but the stock has ~$2 in cash so there is not much down side here. Good for a spec at $4.