The Power Solutions stock price has bounced back in the past few days as market participants waited for its quarterly and annual financial results. The PSIX stock rose to $35 on Wednesday, up by 42% from its lowest level this month. So, is PSIX a good mid-cap stock to buy this year?
Power Solutions company background
Power Solutions is an American company that makes engines that are used in several industries like data centers, natural gas, biofuels, forklifts, and other areas like pumps and utility vehicles. Its costumers are original equipment manufacturers in the US and other countries like in China.
PSIX categorizes its business into three: power systems, industrial, and transportation. The power systems business represents about 49% of its business and is followed by industrial and transportation.
Power Solutions International’s business has slowed in the past few years as demand for its engine solutions waned. Its annual revenue dropped to $459 million in 2023 from $481 million a year earlier. Revenues in the last four quarters dropped to $436 million.
Still, this slowdown has not prevented the PSIX stock price from surging and being one of the best performers in Wall Street. Power Solutions stock peaked at $45.7 in 2024, up by over 2,547% from its lowest level during the year.
PSIX earnings ahead
The next catalyst for the Power Solutions stock price will be its earnings, which will come out on Friday this week.
The most recent numbers showed that Power Solutions revenue rose by 9% in the third quarter to $125 million. The gross and net profits rose to $36.4 million and $17.3 million, respectively.
This growth was driven by the power solutions business that the data center segment has boosted. Most companies in the cloud computing industry, like Microsoft, Amazon, and Google have boosted their spending on data centers as demand for artificial intelligence rises.
This growth, has in turn, led to more demand for power, which PSIX provides. Other companies with exposure to this industry like Rolls-Royce have done well too.
The other catalyst that propelled the Power Solutions stock price was that the management worked to improve its balance sheet. It did that by refinancing its debts and securing a new credit line that provides up to $120 million in cash at better rates. As part of this deal, the company also received a commitment from Weichai that allowed it to borrow up to $105 million.
Many Wall Street analysts do not follow Power Solutions Limited since it has been a fairly small company. The average estimate is that its revenue will come in at $140.7 million, up by 34% from a year earlier. This revenue will bring the annual figure to $472 million, a 2.9% annual increase. It will then make $509 million this year.
A key concern about Power Solutions stock is that its valuation has become highly stretched in the past few months.
Power Solutions International stock price analysis
The daily chart shows that the PSIX share price has been in a strong uptrend in the past few days. After bottoming at $24.50 this month, it has recovered to the current $35. The stock has moved above the 50-day and 100-day Exponential Moving Averages (EMA).
Oscillators like the Relative Strength Index (RSI) and the MACD have all pointed upwards. It also moved above the top of the trading range of the Murrey Math Lines at $31.25.
Therefore, the stock will likely continue rising a bit after publishing its financial results. If this happens, the next point to watch will be $37.5, the strong pivot reverse point. In the long term, however, the Power Solutions stock price may retreat as it moves to the distribution phase of the Wyckoff Theory.
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