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

Antique Mint Condition Corvette Car

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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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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