Seeking Alpha: Challenging End Markets Weighing On Global Power Equipment

Roughly a year ago, I looked into Global Power Equipment (GLPW) ("Global Power Equipment Is Either A Big Value Or A Trap") and came away thinking that although 2013 would be a challenging year, there was a good risk-reward profile overall. The performance since then has reflected that to some extent, as the shares are up about 15% since then, but have been relatively volatile.

Demand in the nuclear power service market has remained weak, and the company's efforts to build out its products/solutions business are going to take time to bear fruit. Long term, it makes sense to get involved in areas like pipelines, distributed generation, and LNG, but plenty of companies with ties to the natural gas/LNG equipment space (like Chart Industries (GTLS) and Dresser-Rand (DRC)) can attest to the challenging demand environment right now. Sluggish guidance doesn't help near-term prospects, but Global Power's shares still look interesting for patient investors wanting to be long on natural gas, LNG, and power gen infrastructure.

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Challenging End Markets Weighing On Global Power Equipment

Seeking Alpha: Global Power Equipment Is Either A Big Value Or A Trap

By and large, investors do well for themselves if they assume that something that looks too cheap to be believed shouldn't be believed. Of course, carry that philosophy too far and you miss most of the really impressive turnarounds and long-term growth stories.

That brings me to Global Power Equipment (GLPW). This company has been suffering lately from lower service demand and delayed orders, but nevertheless offers an intriguing mix of sustainable recurring revenue and leverage to natural gas-fired electricity generation expansion. A discounted cash flow suggests significant potential undervaluation, but investors would do well to remember that many power/utility-focused companies have ultimately disappointed relative to their long-range forecasts.

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Global Power Equipment Is Either A Big Value Or A Trap