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Comverge Investment Analysis
 

Comverge Investment Analysis

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A complete financial report of the clean energy company known as comverge. Analysis includes an executive summary, company history, market analysis, financial analysis, analyst opinions, and a final ...

A complete financial report of the clean energy company known as comverge. Analysis includes an executive summary, company history, market analysis, financial analysis, analyst opinions, and a final recommendation.

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    Comverge Investment Analysis Comverge Investment Analysis Document Transcript

    • COMPANY ANALYSIS<br />COMVERGE, INC.<br />Presented to<br />Brad Smith<br />Director of Integrity Investments<br />Integrity Investments<br />Elon, NC<br />Prepared by<br />Charles Weickert<br />Investment Intern, Spring 2010<br />April 16, 2010<br />INTEGRITY INVESTMENTS<br />--Sail into your golden years in a silver chariot<br />DATE:April 16, 2010<br />TO:Brad Smith, Director of Integrity Investments<br />FROM:Charles Weickert, Investment Intern<br />SUBJECT:ANALYSIS OF COMVERGE, INC.<br />This report is an overall assessment of the company known as Comverge. In this report, I used LexisNexis, Thomson ONE Banker, IBISWorld, and Comverge’s Website to find the facts and information presented in my analysis. By analyzing past performance, industry health, financials, and analyst opinions relating to Comverge, I was able to develop an overall recommendation:<br />Integrity Investments should invest in Comverge. Comverge is a company that has struggled in the past financially; however, after going public in 2007, the company has seen a wave of success, even through the recent recession. Over its thirteen years of existence, Comverge has made a number of significant acquisitions and achievements. In the last year it has changed its CEO and has rebounded from the economic downturn with a fresh start. Additionally, the movement of the electric utility industry towards smart grid software leaves Comverge in a prime position. Comverge has patented the innovative smart grid technology known as Apollo Demand Response Management which is currently the leading technology in the industry. As the industry moves away from load based technology towards smart grid technology, Comverge’s share price should grow.<br />This report would not be as complete and thorough as it currently is without the help of my fellow interns. While researching Comverge, other interns helped me with my analysis by questioning certain aspects of my assessment and presenting new topics of interest. Their outside opinion helped me develop the final report that I am now presenting.<br />This report has opened my eyes to the complexity of the society we currently live in. By completing a report on a company that specializes in the technology related to electric utility companies, I realized how broad our economy is and how obscure the markets and industries are within our economy. I have also learned how crucial of a time period the recession is. The choices companies make during this time period are often the deciding factors on how the company will bounce back from this economic downturn.<br />Last, I want to thank you for reading my report of Comverge. If you have any questions or comments relating to Comverge, my report, or my recommendation, please e-mail me at cweickert@elon.edu or calling me at (207) 650-7552.<br />Table of Contents TOC o " 1-3" h z u Table of Contents PAGEREF _Toc259200617 h 2TABLE OF FIGURES PAGEREF _Toc259200618 h 3EXECUTIVE SUMMARY PAGEREF _Toc259200619 h 4Purpose of the Report PAGEREF _Toc259200620 h 4Company Analysis PAGEREF _Toc259200621 h 4Comverge History PAGEREF _Toc259200622 h 4Comverge Market Analysis PAGEREF _Toc259200623 h 4Comverge Financial Analysis PAGEREF _Toc259200624 h 4Recommendation PAGEREF _Toc259200625 h 5REPORT OVERVIEW PAGEREF _Toc259200626 h 6Background PAGEREF _Toc259200627 h 6Purpose PAGEREF _Toc259200628 h 6Sources and Methods PAGEREF _Toc259200629 h 6Scope PAGEREF _Toc259200630 h 6Organization PAGEREF _Toc259200631 h 6COMVERGE HISTORY PAGEREF _Toc259200632 h 7The Beginning of Comverge PAGEREF _Toc259200633 h 7Pivotal Acqusitions PAGEREF _Toc259200634 h 7Milestone Achievements PAGEREF _Toc259200635 h 7Current Focus on Comverge PAGEREF _Toc259200636 h 8Mission Statement PAGEREF _Toc259200637 h 8Current CEO PAGEREF _Toc259200638 h 8COMVERGE MARKET ANALYSIS PAGEREF _Toc259200639 h 9Comverge’s Industry PAGEREF _Toc259200640 h 9Revenues within the Measuring, Testing, and Navigational Manufacturing Industry PAGEREF _Toc259200641 h 9Comverge’s Relative Market Share PAGEREF _Toc259200642 h 9Comverge’s Competitive Advantage PAGEREF _Toc259200643 h 9Comverge versus Itron PAGEREF _Toc259200644 h 10COMVERGE FINANCIAL ANALYSIS PAGEREF _Toc259200645 h 11Assets PAGEREF _Toc259200646 h 11Revenues and Earnings PAGEREF _Toc259200647 h 11Earnings Per Share PAGEREF _Toc259200648 h 13Price to Earnings Ratio PAGEREF _Toc259200649 h 13Comverge Analyst Opinion PAGEREF _Toc259200650 h 14Comverge Shows Growth Along With Industry PAGEREF _Toc259200651 h 14Stimulus Funds Provide an Optimistic Future PAGEREF _Toc259200652 h 14Implications of Pennsylvania Act 129 PAGEREF _Toc259200653 h 14Comverge and the Environment PAGEREF _Toc259200654 h 16Recommendation PAGEREF _Toc259200655 h 17References PAGEREF _Toc259200656 h 18<br />TABLE OF FIGURES<br /> TOC h z c " Figure" Figure 1: Five Year Industry Revenues PAGEREF _Toc259027971 h 4<br />Figure 2: Revenues 2005-2009 PAGEREF _Toc259027972 h 6<br />Figure 3: Earnings 2005-2009 PAGEREF _Toc259027973 h 7<br />Figure 4: Revenues vs. Earnings 2005-2009 PAGEREF _Toc259027974 h 7<br />Figure 5: Earnings Per Share 2005-2009 PAGEREF _Toc259027975 h 8<br />Figure 6: Price to to Earnings Ratio since Initial Public Offering PAGEREF _Toc259027976 h 8<br />EXECUTIVE SUMMARY<br />Purpose of the Report<br />The purpose of this report is to give a detailed analysis of Comverge, Inc. from which a decision can be made on whether to invest $1 million in the company. This analysis will begin with a basic history of the company along with fundamental information on the business. From there, the report will give a thorough summary of the company’s industry, including Comverge’s competition and various market statistics. Last, a comprehensive overview of Comverge’s financials will be discussed. The data and facts used in this report were obtained from Comverge’s website, LexisNexis, Thomson One Banker, IBISWorld, and MarketWatch. From the discussion topics previously listed, Integrity Investments will have sufficient enough information to make an accurate investment decision.<br />Company Analysis<br />Comverge History<br />Comverge was co-founded in 1997 by Frank Magnotti and John Rossi. The company was started through divisions in Scientific Atlanta and Lucent Technologies. Over time, Comverge began acquiring other smaller company divisions such as PowerCom, Sixth Dimension, Enerwise, and Public Energy Solutions. (Comverge 10-K Annual Report, March 8, 2010)<br />In 2007, the company held its initial public offering. After its IPO, Comverge’s revenues skyrocketed (Thomson ONE Banker). The company gained a national presence through innovative technology such as Virtual Peaking Capacity and Apollo Demand Response Management. (LexisNexis, 2010)<br />Comverge’s current CEO is Blake R. Young. Young has worked at Comverge since 2006, and was recently appointed CEO in February of 2010. Young has a phenomenal background in the industry which provides Comverge with a great wealth of knowledge. (www.comverge.com, 2010)<br />Comverge Market Analysis<br />Specifically, Comverge is highly immersed in demand response management within the electric utility market. Broadly, Comverge is part of the measuring, testing, and navigational manufacturing industry. In the last five years, this industry has been slowly growing. In the electric utility market, the future appears to be in the field of smart grid technology. Fortunately for Comverge, this is where the majority of the company’s expertise exists. (IBISWorld, 2010)<br />Comverge Financial Analysis<br />At the end of 2009, Comverge held total assets of $120 million. The value of Comverge’s assets has fluctuated dramatically over the past five years. In 2005 and 2006, the company held between $20 million and $30 million in assets. After its initial public offering in 2007, Comverge’s total assets peaked at $203 million. Since the recession, this value has dropped considerably. (Thomson ONE Banker, 2010)<br />Comverge’s revenues have consistently grown over the last 5 years. In 2005, Comverge generated $23 million dollars in revenue. In 2009, Comverge generated $98 million in revenue. Thus, the company has yielded an average annual growth of 13.75%. By expanding its customers and products through company acquisitions and innovation, Comverge has continually grown in its revenues. However, the company’s earnings are not directly related. Between the three year span of 2005-2007, Comverge’s earnings were very close in value and differed by just $1 million. After the recession that year, its earnings fell to an all time low of $-94 million. Through its Apollo Demand Response Technology and Virtual Peaking Capacity programs, Comverge recovered from the economic downturn by generating $61 million more in revenue between the 2008 and 2009 fiscal years. (Thomson ONE Banker, 2010)<br />Recommendation<br />Integrity Investments should invest in Comverge. Comverge is a company that has struggled in the past financially; however, after going public in 2007, the company has seen a wave of success, even through the recent recession. Over its thirteen years of existence, Comverge has made a number of significant acquisitions and achievements. In the last year it has changed its CEO and has rebounded from the economic downturn with a fresh start. Additionally, the movement of the electric utility industry towards smart grid software leaves Comverge in a prime position. Comverge has patented the innovative smart grid technology known as Apollo Demand Response Management which is currently the leading technology in the industry. As the industry moves away from load based technology towards smart grid technology, Comverge’s share price should grow.<br />REPORT OVERVIEW<br />Background<br />Integrity Investments is a financial services company that sells mutual funds. At Integrity Investments, a group of newly hired interns has been asked to provide one additional stock to our company’s Columbus Fund. Each intern must individually research one company from the S&P 500. Integrity Investments will invest $1 million in whichever company the group of interns decides upon. This company should be currently stable with a promising future. <br />Purpose<br />The purpose of this report is to provide a recommendation to Integrity Investments as to whether Comverge should or should not be added to The Columbus Fund. This recommendation will be based off a detailed assessment and analysis of the company over the last five years. If the company is chosen, $1 million dollars will be invested. Additionally, the chosen company should provide a return on investment of at least seven percent.<br />Sources and Methods<br />This report includes facts, analysis, and data that have been collected from various websites and databases including Comverge’s website and SEC filings, Thomson ONE Banker, LexisNexis and IBISWorld. Information about Comverge, including the company’s products, services, employees, and future outlook, were found on Comverge’s website. Financial information and analyst opinions were found using Thomson ONE Banker. LexisNexis provided news and articles relating to the company and helped with analyzing Comverge. IBISWorld was helpful in researching the industry.<br />Scope<br />This report is comprised of Comverge’s history, five year financial summary, industry performance, and business principles. A discussion of the company’s ethics is also included in this report. News and events that hold implications on Comverge’s future are presented as well. <br />Organization<br />This report reaches a recommendation to Integrity Investments by covering the following topics:<br />
      • History- Discusses the start-up of the company before introducing company acquisitions and achievements. This section is concluded with a look at Comverge today.
      • Industry- Examines Comverge’s market both broadly and specifically. This discussion is followed by sections on Comverge’s competitive advantage and contenders in the industry.
      • Financials- Analyzes the company by looking at figures such as revenues, earnings, EPS, P/E ratio, and assets.
      • Analyst Opinions- Presents various points and opinions brought up by analysts. These analysts predict the future status of Comverge.
      • Ethics- Discusses an ethical aspect of Comverge. The company has a social responsibility to stay environmentally friendly.
      These five sections sum up Comverge while looking at the past, present, and future. From this analysis, the report is concluded with an overall recommendation to Integrity Investments as to whether the company should be added to The Columbus Fund portfolio.<br />COMVERGE HISTORY<br />The Beginning of Comverge<br />Comverge was co-founded in 1997 by Frank Magnotti and John Rossi. Upon its creation, the company acted as a subsidiary to Acorn Energy, Inc. By the end of the 1997, Comverge was comprised of three major company’s divisions: Scientific Atlanta, Lucent Technologies, and PowerCom. Divisions from these three companies collaborated to form a business that looked to specialize in electric utility data management along with green solutions to reduce costs and demand. Prior to the establishment of Comverge, Frank Magnotti led Enterprise Group as President while John Rossi served 25 years at Bell/Lucent Laboratories. Since the company was founded, a number of acquisitions have been made to add to the company’s knowledge and experience; consequently, the company has grown to be a leader in the demand response industry. (www.comverge.com, 2010)<br />Pivotal Acquisitions<br />Comverge’s success can be attributed to its large scope of industry knowledge. This knowledge exists through a collaboration of numerous companies and company divisions that Comverge has acquired. The company and the respective acquisition made by Comverge are as follows:<br />
      • 1997 – Lucent Technologies – Utility Solutions Division
      • 1997 – Acorn Energy – PowerCom Division
      • 1999 – Scientific Atlanta – Controls System Division
      • 2003 – Sixth Dimension – Intellectual Property, Customers, and Assets
      • 2007 – Enerwise Global Technologies – Entire Company
      • 2007 – Public Energy Solutions – Entire Company
      • (Comverge 10-K Annual Report, March 8, 2010)
      Milestone Achievements<br />Aside from acquisitions listed above, Comverge has been consistently developing its presence in the United States. Initially, the company remained relatively unknown outside of the Atlanta area; however, upon extensive company growth, the company has made the following achievements nationally:<br />
      • Creating its first trademarked Virtual Peaking Capacity program in 2002: Under Virtual Peaking Capacity, Comverge made the decision to outsource all of its load management systems for the benefit of the consumers. Virtual Peaking Capacity optimizes energy demand for its utility consumers during peak periods of the year. As a result of this innovative technology, Comverge immersed itself into the energy management industry. Utility companies began signing long-term joint venture contracts with Comverge that allowed them to focus on providing dependable and affordable energy to their respective communities while Comverge centered its attention on the management of peak energy demand. (LexisNexis, 2010)
      • Reaching 2200 megawatts of managed electrical capacity: Upon reaching this operational milestone in September of 2008, Comverge surpassed the previous industry record for electrical capacity. This feat was a directly caused by the company’s initial public offering in April of 2007. In the 18 months following its offering, Comverge increased the amount of megawatts it managed by 508%. Similarly, its revenues grew by 137% in this period as well. (LexisNexis, 2010)
      • Recovering from the recession. Comverge was majorly affected by the recession. However, it has since made a number of significant gains that have brought the company into a stable state. In 2009, the company reached the milestone of five million installed demand response devices. By the end of the 2009 fiscal year, Comverge announced that it had reached a two year high in free cash flow. In March of 2010, the company announced extensive improvements that were made to its Apollo Demand Response Management System. After a series of positive changes by Comverge, the company has re-secured itself in the future of the industry. (LexisNexis, 2010)
      Current Focus on Comverge<br />Mission Statement<br />As stated on Comverge’s website, “Comverge is a leading Clean Energy company providing innovative solutions that significantly reduce peak electricity costs and increase grid reliability. Our purpose is to lead the evolution of the energy industry with environmentally friendly solutions. Comverge will accomplish this through the development and deployment of Virtual Peaking Capacity™ programs, Load Management and control systems, and real-time energy data collection and management, as well as other initiatives to reduce energy costs and improve grid reliability.” (www.comverge.com, 2010)<br />Comverge prides itself in staying true to its mission statement. The company has done this by maintaining excellent customer relationships, consistently providing innovative energy solutions, and utilizing the extensive industry experience that Comverge’s employees hold. <br />Current CEO<br />Since February of 2010, Blake R. Young has represented Comverge as the company’s President and Chief Executive Officer. Formerly, Young held a seat on Comverge’s Board of Directors since 2006. Young, at age 51, is extremely experienced in the energy industry. Before Comverge, Young founded Cap2ity Consulting Group, a management consulting group based in Texas. Previously, Young was Senior Vice President of Global IT & Technology for the international energy company known as BG Group. Young worked many senior management positions at Dynegy Inc. and served as President of Illinois Power Company. Young’s gives Comverge an advantage as he has extensive experience working for utility companies- Comverge’s primary consumers. Young is very determined to keep Comverge on its recent path to success. His diligence coupled with his experience provides Comverge with a powerful force for the future. At this point, Young plans to ride the successful strategy it is currently operating under. However, he recognizes the evolving industry movement towards smart grid technology; because of this movement, Young plans to place a great deal of emphasis on Comverge’s Apollo Demand Response Management System. This equipment focuses exclusively on smart-grid technology and Young envisions it to be the future of his company. (Automation/IT Leadership Series Interview, 2010) (www.comverge.com, 2010)<br />COMVERGE MARKET ANALYSIS<br />Comverge’s Industry<br />Specifically, it is highly immersed in demand response management within the electric utility market. Comverge has taken this market to new heights by incorporating green practices into its innovative products and services. (www.comverge.com, 2010) <br />Broadly, Comverge is a part of the measuring, testing, and navigational manufacturing industry. This extremely comprehensive industry covers navigational technology in any field. (IBISWorld, 2010)<br />Revenues within the Measuring, Testing, and Navigational Manufacturing Industry<br />This wide-ranging industry has been relatively healthy over the past decade. Excluding the economic recession, the industry saw continuous growth after 2003 as seen in Figure 1.<br />Figure 1: Five Year Industry Revenues<br />Comverge’s Relative Market Share<br />It is important to recognize the size and obscurity of the electric utility technology industry. Within this specific industry, Comverge is the leading company in terms of revenues, devices installed, or megawatt management. However, when comparing Comverge’s revenues to the entire measuring, testing, and navigational manufacturing industry, its market share appears miniscule at just 0.076%. (IBISWorld, 2010)<br />Comverge’s Competitive Advantage<br />Comverge has secured its position atop its market because of its various competitive advantages:<br />
      • Innovative Products and Services: In 1997, before the green movement had begun, Comverge aimed to integrate environmentally friendly business practices with its technology. These patents have allowed Comverge to provide innovative green business solutions to its electric utility consumers. In a world with a social responsibility to reduce energy usage, Comverge holds the upper hand over its competitors. Furthermore, government legislation is striving to reduce energy consumption throughout the US by setting target energy usage rates. In order to comply with these target consumption rates, many companies are switching to Comverge. (www.comverge.com, 2010)
      • Patents: By attempting to go green before its competition, Comverge beat its competitors to a number of crucial patents. Currently, Comverge holds 15 patents in its field. These 15 patents act as a barrier to Comverge’s contenders and provide the company with more security. (www.comverge.com, 2010)
      • Experience and Scope of Knowledge: Through Comverge’s acquisitions since its creation in 1997, the company has assembled a highly intelligent and diversified staff. With a wide range of employees from various divisions of different companies, Comverge continues to invent revolutionary products for its consumers. Moreover, the experience in Comverge’s senior management allows for a smoothly run business that is well aware of market trends and industry history. (www.comverge.com, 2010)
      • Apollo Demand Response Management Technology: As electric utility technology has moved towards smart-grid technology, so have Comverge’s products. Currently, Comverge’s patented Apollo Technology exists as the most comprehensive product in the market. This product is undoubtedly not only the future of Comverge but the future of smart-grid technology. (www.comverge.com, 2010)
      Comverge versus Itron<br />Itron Inc. is a rivaling technology provider that offers energy solutions to electric and water utility companies. Unlike Comverge, Itron has an international presence. With an expansion outside of the United States, Intron generates significantly more revenue; however, a great deal of this revenue can be credited to its engagement in the water technology market. In 2008, Itron was in good condition, despite the recession, with annual revenues of $1.91 billion and a net income of $28 million. However, this past year in 2009, Itron actually decreased its annual revenues to $1.69 billion and ended with a net income of $-2 million. Conversely, Comverge increased its revenues by $22 million and brought its net income up from $-94 million to $-32 million. (Thomson One Banker)<br />In terms of company assets, Itron clearly has the advantage. In 2009, Comverge had just $120 million in assets while Itron had 22 times more with $2.77 billion in assets. Again, although Itron has far more assets, a large portion of these assets can be attributed to its immersion in the water technology market. (Thomson One Banker) <br />COMVERGE FINANCIAL ANALYSIS<br />When looking at Comverge’s five year financial statistics, it is imperative to take into consideration the recession in 2008. Comverge was strongly affected by this economic downturn; the effects of this collapse are very evident in the data presented below.<br />Assets<br />At the end of 2009, Comverge held total assets of $120 million. The value of Comverge’s assets has fluctuated dramatically over the past five years. In 2005 and 2006, the company held between $20 million and $30 million in assets. After its initial public offering in 2007, Comverge’s total assets peaked at $203 million. Since the recession, this value has dropped considerably.<br />Revenues and Earnings<br />Comverge’s revenues have consistently grown over the last 5 years (Figure 2). In 2005, Comverge generated $23 million dollars in revenue (Figure 2). In 2009, Comverge generated $98 million in revenue (Figure 2). Thus, the company has yielded an average annual growth of 13.75%. By expanding its customers and products through company acquisitions and innovation, Comverge has continually grown in its revenues (Figure 2). However, the company’s earnings are not directly related (Figure 3).<br />Figure 2: Revenues 2005-2009<br />Between the three year span of 2005-2007, Comverge’s earnings were very close in value and differed by just $1 million (Figure 3). After the recession that year, its earnings plummeted to its all time low of $-94 million (Figure 3). Through its Apollo Demand Response Technology and Virtual Peaking Capacity programs, Comverge swiftly recovered from the economic downturn by generating $61 million more in revenue between the 2008 and 2009 fiscal years (Figure 3).<br />Figure 3: Earnings 2005-2009<br />From 2005-2007, the difference between Comverge’s revenues and earnings slowly grew apart (Figure 4). In 2008, this difference skyrocketed to $171 million; however, this value improved by $40 million to a difference of $141 million (Figure 4). <br />Figure 4: Revenues vs. Earnings 2005-2009<br />Earnings per Share<br />Over the last five years, Comverge has yet to see a positive EPS (Figure 5). Furthermore, it has not posted two consecutive years of improving EPS. However, with that being said, Comverge’s EPS has tended to follow the trend of the economy. From 2007 to 2008, there was a dramatic decrease in EPS; however, it jumped back up in 2009.<br />Figure 5: Earnings per Share 2005-2009<br />Price to Earnings Ratio<br />Comverge’s P/E ratio has steadily improved between 2007 and 2008 (Figure 6). At the close of 2008, Comverge held a price to earnings ratio very close to 0. In 2009, however, this ratio decreased again (Figure 6). Compared to the S&P 500 P/E ratio average, Comverge has not been very similar in price nor in movement (Figure 6). While the S&P 500 index has held a positive P/E ratio, Comverge has yet to accomplish this feat.<br />Figure 6: Price to Earnings Ratio since Initial Public Offering<br />Comverge Analyst Opinion<br />Comverge Shows Growth Along With Industry<br />Over the past 12 months, Comverge has seen a sales growth of twenty eight percent. In the next year, the company is predicted to increase $75 million in sales revenue. Bill Paul, analyst at EnergyTechStocks, believes that Comverge will continue to grow both financially and in share price. While the alternative energy industry is currently only a multi-million dollar industry, analysts such as Bill Paul anticipate a massive increase in market size. (Juhl Wind, Lime Energy, Comverge: Possible Takeover Candidates, November 29, 2009)<br />In Bill’s opinion, an expansion in the electric utility technology market would be a result of smart grid technology and an increasing global awareness of our environment. Comverge will follow this market increase by expanding as a company. Currently, Comverge holds the leading patented software for smart grid technology. According to Bill, a growth in Comverge’s market must also result in a growth in Comverge itself. (Juhl Wind, Lime Energy, Comverge: Possible Takeover Candidates, November 29, 2009)<br />Stimulus Funds Provide an Optimistic Future<br />After the economy dipped into the recession in 2008, the government needed to devise a temporary plan that motivated company spending. In the last year, the government has been issuing grants to various companies around the nation that, in turn, will stimulate the economy. (Thomson ONE Banker, 2010)<br />Comverge’s products are among the most effective and efficient of its kind on the market; however, they are also some of the most expensive as well. Brian Kremer, senior research analyst at Roth Capitals, believes that the stimulus funds allocated to various companies by the government will favor Comverge. This is due to the fact that nineteen of Comverge’s customers were issued government grants. According to Kremer, these government grants will lead companies to choose Comverge over cheaper alternatives. By the end of 2010, Kremer believes that Comverge will reach a share price of $15. (Thomson ONE Banker, 2010)<br />Implications of Pennsylvania Act 129<br />Around the globe, there is a consistent societal pressure to reduce emissions and decrease the amount of energy used. This effort is mainly in part to global warming and a deteriorating environment. In Pennsylvania, this societal pressure has gone far enough that the state has issued Pennsylvania Act 129. Under this act, the state requires that companies must reduce energy consumption by three percent and peak demand by four and a half percent. This hard lined mandate will greatly affect the state of Pennsylvania; furthermore, it could set precedent around the nation. (Thomson ONE Banker, 2010)<br />In Pennsylvania, PECO is the leading electricity supplier for the entire state. PECO has existed for over 100 years, and has solidified its presence among the Philadelphia area. In the state, PECO serves over 2 million customers and continues to expand its numbers. (PECO Selects for Energy Management Program, March 25, 2010)<br />In order to comply with government legislation, particularly Pennsylvania Act 129, PECO has recently switched its outsourcing to Comverge. Comverge’s Apollo Demand Response Management is the nation’s leading smart grid technology. Although more expensive than most, this technology reduce energy consumption more effectively than any other product. (PECO Selects for Energy Management Program, March 25, 2010)<br />Because of Pennsylvania Act 129, analyst Charles Fishman believes that Comverge is on the rise. Based on Pennsylvania Act 129 and a wide background of experience in the field, Fishman is putting Comverge at a target price of $13 by the close of 2010. (Thomson ONE Banker, 2010)<br />Comverge and the Environment<br />At Comverge, the company prides itself on its green initiative. Since its creation in 1997, Comverge has devoted itself, its products, and its practices to being environmentally friendly. Because its products and services deal with electricity, and are therefore closely related to the environment, Comverge feels a societal pressure to staying healthy and not harming the earth. (www.comverge.com)<br />The first signs of the green movement appeared in the early 21st century. This was around the same time that talk of global warming began to arise. Because global warming was so colossal in nature and impact, scientists and researchers began investigating causes. However, before any of these research expeditions, Comverge had already vowed to be an environmentally friendly company that offered what it still calls “clean energy.”<br />Comverge had beat many companies to the green movement. Because of this, it landed a number of significant patents and trademarks for their innovative energy solutions. As time progressed, this early jump on the green movement appeared to be the differentiating factor for Comverge over the company’s competition. Soon enough, Comverge had purchased a number of company divisions that expanded market share and increased revenue. (Comverge 10-K Annual Report)<br />New CEO Blake R. Young has devoted himself to staying true to the original goals of Comverge. He still strives for improvement through innovative solutions, but ensures the public that all of Comverge’s energy solutions will be clean and environmentally friendly. Evidently, Young’s efforts have paid off as Comverge has been continually recognized for its greenness. (Automation/IT Leadership Series Interview, 2010)<br />On March 30th, 2010, Comverge was recognized by the Atlanta Business Chronicle by receiving the top environmental award under the “envention” category. This category recognizes businesses that “exhibit outstanding environmental or ‘green’ benefits.” Comverge prides itself on its products and services so that it can receive such awards. (Comverge Wins Environmental Award, March 30, 2010)<br />As Comverge moves forth in 2010 and into the future, it will be interesting to see how the company improves upon its already stellar green practices. With the industry moving towards smart grid technology, Comverge’s area of expertise, I anticipate Comverge to continue to provide innovation that is healthy for the environment. It is important for Comverge to remain in good standing with the public. Since the company’s creation, it has done an excellent job in fulfilling its social responsibility; however, it is up to them to continue it.<br />Recommendation<br />In 2007, after its initial public offering, Comverge posted a year end share price of $31.49. However, just one year later, Comverge’s year end share price plummeted to $4.90. This stock may appear risky and volatile from an outsider’s perspective; however, all indications point to buying Comverge.<br />Comverge is a rising company and its share price will continue to grow. I strongly believe that Comverge will expand as a company, increase earnings, and grow in share price. Over the past three years, Comverge has been battling the recession and devastating economy. Instead of merely recovering, Comverge has fully rebounded from its dark and gloomy period in 2008. I recommend that Integrity Investments invests in Comverge because of the following:<br />
      • An industry moving towards smart grid technology: As electric utility technology has developed over the years, nothing has been more certain- smart grid technology is the future of the industry. With that being said, Comverge’s Apollo Demand Response Management is the most efficient and effective smart grid technology offered in the United States. I anticipate a large influx of customers to switch outsourcing over to Comverge’s products and services.
      • A new CEO with great aspirations: This past February, Comverge appointed Blake R. Young as the company’s president and CEO. Young has a comprehensive background of the electric utility market, and has managed several companies across the United States. His knowledge, leadership, and approach will bring Comverge to new heights.
      • Consistent Financial Growth: Over the past five years, Comverge has a 13.75% annual growth in revenues. Although earnings have not shown the same success, this can be attributed to the recent economic downturn. Comverge will generate more revenue in the future as the company continues to form more strategic alliances with utility companies around the nation. As the government mandates more laws relating to energy consumption, I expect more companies to switch their outsourcing to Comverge.
      In Conclusion, all signs indicate that Comverge’s share price will rise. Although the company has a shaky history, it has emerged as the leading electric utility technology company in the United States over the last five years. While this industry grows, Comverge will grow alongside it. I strongly suggest that Integrity Investments puts equity into this company, as any money invested will be sure to grow.<br />References<br />" Automation/IT Leadership Series Interview." Electric Energy Online. 2010. Web. 10 Apr. 2010. <http://www.electricenergyonline.com/?page=show_article&mag=62&article=475>.<br />" Comverge - 10-K Annual Report." Comverge Investor Relations. 08 Mar. 2010. Web. 03 Apr. 2010. <http://ir.comverge.com/secfiling.cfm?filingID=1372664-10-15>.<br />“Comverge Company Report.” Thomson ONE Banker. Web. 15 Mar. 2010.<br />“Comverge, Incorporated – Company Report US.” 2010: IBISWORLD. Web. 02 Apr. 2010.<br />“Comverge, Inc.” LexisNexis. 2010. Web. 03 Apr. 2010.<br />" Comverge Wins Environmental Award." Comverge. 30 Mar. 2010. Web. 14 Apr. 2010. <http://www.comverge.com/news-events/news/03302010_2.cfm>.<br />" Comverge Inc,." MarketWatch. 16 Apr. 2010. Web. 10 Mar. 2010. <http://www.marketwatch.com/investing/stock/comv>.<br />Mastrandrea, Kristen. " PECO Selects for Energy Management Program." Comverge. 25 Mar. 2010. Web. 15 Apr. 2010. <http://www.comverge.com/news-events/news/03252010_2.cfm>.<br />Paul, Bill. " Juhl Wind, Lime Energy, Comverge: Possible Takeover Candidates?" Seeking Alpha. 29 Nov. 2009. Web. 12 Apr. 2010. <http://seekingalpha.com/article/175023-juhl-wind-lime-energy-comverge-possible-takeover-candidates>.<br />