Since July 2024, American Superconductor has been in a holding pattern, posting a small return of 0.9% while floating around $24.31. The stock also fell short of the S&P 500’s 7.3% gain during that period.

Given the weaker price action, is now a good time to buy AMSC? Or should investors expect a bumpy road ahead? Find out in our full research report, it’s free.

Why Are We Positive On American Superconductor?

Founded in 1987, American Superconductor (NASDAQ:AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, American Superconductor grew its sales at an incredible 25.5% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers.

2. Increasing Free Cash Flow Margin Juices Financials

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, American Superconductor’s margin expanded by 30.5 percentage points over the last five years. American Superconductor’s free cash flow margin for the trailing 12 months was 10.4%.

3. New Investments Bear Fruit as ROIC Jumps

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We typically prefer to invest in companies with high returns because it means they have viable business models, but the trend in a company’s ROIC is often what surprises the market and moves the stock price. Over the last few years, American Superconductor’s ROIC has increased. This is a good sign, but we recognize its lack of profits during the COVID era contributed to its high growth.

Final Judgment

These are just a few reasons why we're bullish on American Superconductor. With its shares trailing the market in recent months, the stock trades at 69.6× forward price-to-earnings (or $24.31 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.

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