Are Metering and Smart Metering Stocks a Smart Investment? ITRI, ELT, POWT

Given the high or fluctuating costs of energy, metering or smart metering stocks like Itron (NASDAQ: ITRI), Elster Group SE (NYSE: ELT) and POWRtec International (OTC: POWT) make sense – at least on the surface. After all, the smart grid industry is expected to grow from $356 million in 2010 to nearly $4.2 billion by 2015 when government and private sector investments in smart-grid technology total more than $45 billion. So how smart would an investment in smart metering stocks like Itron (ITRI), Elster Group SE (ELT) and POWRtec International (POWT) be for investors? Here is a closer look at all three to help you decide:

Itron (NASDAQ: ITRI)

Itron offers end-to-end smart metering solutions to electric, natural gas and water utilities around the world. On Tuesday, Itron rose 3.80% to $36.63 (ITRI has a 52 week trading range of $26.90 to $64.39 a share) for a market cap of $1.49 billion. However, Itron has loss about 34% of its value over the past year but appears to have stabilized and is trending upward (the company has also authorized a repurchase of up to $100 million shares of stock during the next 12 months). Moreover, its CEO and President has recently bought $1 million worth of shares or 27,000 shares at $37.31. Nevertheless, investors should take note that Itron has recently reported 3Q2011 revenue of $615.6 million – along with a massive net loss of $517 million due to a goodwill impairment of $540 million. Hence, Itron announced that it will close several manufacturing units plus cut 750 full-time positions (7.5% of its global workforce) and take a pretax restructuring charge of about $65-$75 million over the next 15 to 18 months in the hope of saving about $30 million annually in 2013. The company also plans to close or consolidate plants over the next 15 to 18 months. For patient investors with a long-term horizon, Itron could be an investment that pays off – if the company is able to right itself.

Elster Group SE (NYSE: ELT)

Elster Group provides gas, electricity, and water meters, and related communications, networking, and software solutions to the residential, commercial, and industrial sectors worldwide. Investors should note that Elster Group has recently reported that 3Q2011 revenues rose 2.9% year-over-year to $464.4 million while GAAP net income came in at $23.3 million. Elster Group’s CEO pointed out that their gas business and geographic diversity is responsible for the company’s steady performance despite a challenging macro environment – especially in places like North America. Moreover, he is encouraged by Elster Group’s strong forward order book (contracted future revenues are nearly $1.1 billion) and the momentum coming from Europe and Latin America for Smart Grid deployments. On Tuesday, Elster Group fell 8.07% to $12.65 (ELT has a 52 week trading range of $11.52 to $17.74 a share) for a market cap of $1.43 billion but I am not seeing any public news to explain the fall.

POWRtec International (OTC: POWT)

POWRtec International is in the business of manufacturing of intelligent metering systems and claims to have the most advanced, fully-functioning networked meters in the industry. However and for the past four quarters, POWRtec International has reported no revenues and net losses of $169k (most recent quarter), $164k, $125k and $1,845k. POWRtec International also reported $2k in cash to cover $3,031k in current liabilities at the end of 3Q2011 – leaving investors to wonder how intelligent of an investment would be in the company at this point in time. Nevertheless, POWRtec International could receive a jolt from either a stock promotion if and when the company gets off the ground. On Tuesday, POWRtec International closed at $0.120 (POWT has a 52 week trading range of $0.04 to $0.50 a share) for a market cap of $12 million.

The Bottom Line. Conservative investors might want to check out Elster Group SE (ELT) and less conservative investors interested in a turnaround play should check out Itron (ITRI) while POWRtec International (POWT) is probably best avoided for now.