Why PWR Holdings Ltd could see its share price rise from here

The second-half of the 2017 financial year should be much better for PWR Holdings Ltd (ASX:PWH)

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published July 21, 2017 12:11 pm AEST

PWR Holdings Ltd (ASX: PWH) has seen its share price sink more than 7% so far in 2017 to trade at around $2.29 currently, with some shareholders seemingly not happy with the performance of the automotive company this year. That may be an opportunity at these prices.

What investors may not realise is that PWR Holdings is forecasting a better second-half, with revenues and profit driven by calendar-year motorsports seasons. The company also says that it continues to make inroads into motorsports markets to generate organic growth, and its reputation in motorsports means PWR Holdings has opportunities in niche original equipment manufacturer (OEM) programs.

PWR Holdings designs and manufactures customised cooling systems for motor vehicles. Its products are in heavy demand from several high-profile motorsports organisations including Formula 1, NASCAR and Australia's V8 Supercars series.

We'd like to see the company diversify its customer range into more motorsports bodies and OEM programs which should increase revenues and make it less vulnerable if it lost one or more of the elite motorsports series.

According to some sources, shares are trading at a P/E ratio of more than 24x which may appear expensive. That ignores the expected increase in earnings, not to mention the potential for higher dividends over time.

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