American Superconductor Corporation AMSC shares have surged 39.8% in the past six months, outperforming the Zacks Computer and Technology sector, S&P 500 index and the Technology Select Sector SPDR Fund XLK ETF’s return of 9.3%, 9.7% and 6.6%, respectively.

American Superconductor shares have also outperformed other players in the Electronics - Miscellaneous Components industry space, including Ballard Power Systems BLDP and Fabrinet FN. While the rally has been remarkable, the key question now is whether AMSC stock still has room to run or if it is time to lock in gains.

AMSC Gains From the Renewable Energy Boom

American Superconductor’s success is rooted in its strategic positioning within the booming renewable energy and grid modernization sectors. The company’s cutting-edge portfolio, including advanced grid interconnection systems, high-temperature superconductor cables and wind turbine designs, aligns perfectly with the global shift toward clean energy and resilient power grids.

Six-Month Price Return Performance

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Recent contract wins exemplify American Superconductor's ability to secure steady revenue streams. Notable deals include a $75-million agreement with the Royal Canadian Navy and a $12-million follow-on order from wind energy leader InoxWinds. These contracts not only strengthen its financials but also reinforce confidence in its execution capabilities.

On its most recent third-quarter fiscal 2024 earnings call, AMSC reported that its wind business contributed 15% to its total revenues and grew 60% year over year. AMSC received $57 million in new orders in the third quarter fiscal 2024. Out of its total order book value, the contracts from its wind business constituted 25% with Inox Wind contributing a whopping $15 million of value.

AMSC Benefits From Its Presence in Multiple Markets

AMSC’s diversified offerings cater to a broad range of industries, including utilities, renewables and defense. The company’s D-VAR systems, which stabilize power grids and advanced wind turbine designs, continue to see strong demand. Its recent acquisition of NWL expands its footprint in the military and industrial markets.

With global defense budgets on the rise, American Superconductor’s marine systems are well-positioned to benefit from increased naval investments. These systems address critical challenges for naval fleets, opening up growth opportunities in the defense sector.

Emerging opportunities in data centers and traditional energy projects are also an upside for AMSC. The CHIPS act in particular has benefited AMSC massively as the act is focused on strengthening the USA semiconductor industry through the promotion of domestic production, improved supply chain security and innovation support. In the third quarter, 85% of grid revenues were from the United States, benefiting from domestic manufacturing incentives. Additionally, 85% of AMSC’s grid revenues came from the United States on the back of domestic manufacturing incentives.

AMSC’s Long-Term Prospects Remain Bright

American Superconductor’s financial performance solidifies its growth narrative. The company reported a 56% year-over-year increase in revenues in the third quarter of fiscal 2024 to $61.4 million.

The Zacks Consensus Estimate indicates continued robust growth for AMSC, with revenues expected to rise 48.2% in fiscal 2025 and 18.1% in fiscal 2026. Earnings per share is forecasted to jump from 2 cents in fiscal 2024 to 61 cents in fiscal 2025 and fiscal 2026.

Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

AMSC’s Valuation: Cause of Caution

While American Superconductor’s fundamentals are strong, its valuation raises concerns. The stock’s forward 12-month price-to-sales (P/S) ratio stands at 4.91, significantly higher than the industry average of 2.56. This premium reflects its technological edge and market leadership but also suggests limited upside in the near term. The Zacks Value Style Score of F further underscores the stock’s stretched valuation.

Forward 12-Month Price-To-Sales Ratio

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Conclusion: Hold AMSC Stock for Now

AMSC’s meteoric rise highlights its strong market presence and ability to capitalize on high-growth sectors like renewable energy and defense. Its strategic moves, innovative solutions and robust financial performance make it a compelling investment for the long term.

However, given its premium valuation, caution is warranted. For investors already holding the stock, staying invested is a prudent strategy. American Superconductor’s leadership in clean energy and grid modernization, coupled with growing defense opportunities, suggests that the company is well-positioned to deliver sustained growth. Holding the stock allows investors to benefit from these tailwinds while reassessing valuation metrics over time.

American Superconductor carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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