Here’s Why American Superconductor Remains a Buy... for Some Investors

By Larry Ramer

American Superconductor (AMSC) continues to grow rapidly, with several strong positive catalysts in the offing, including U.S. data center growth, the Trump administration’s plan to place tariffs on imported computer chips, and the ongoing, large-scale expansion of Indian wind energy company Inox. 

In light of these points, I view Nasdaq-traded AMSC stock as significantly undervalued despite the name’s very strong performance over the last year and its elevated price-to-earnings ratio. Consequently, I recommend that long-term growth investors buy the shares.

AMSC’s products are used to enhance the performance of electrical grids and to manage the electricity generation of wind turbines. 

Expanding Quickly, Generating Significant Profits

In AMSC’s fiscal third quarter (December end), revenue came in at $61.40 million, up from $39.35 million during the same period a year earlier. The increase was driven by both higher sales of its existing businesses and its August 2024 acquisition of NWL, a provider of power supplies for industrial and military applications.  

What’s more, it generated Q3 net income of $2.46 million, versus a net loss of $1.65 million in the year-ago period. Finally, its net cash provided by operating activities came in at an impressive $22 million last quarter, compared with $97,000 of cash burned by operating activities during the same period a year earlier. 

CEO Daniel McGahn noted on Feb. 6 that Q3 had marked the company’s second-consecutive quarter of net income and its sixth-consecutive quarter of positive operating cash flow. Moreover, its total backlog exceeded $300 million, while its backlog slated to be delivered in the next year amounted to more than $200 million. 

AMSC Stock’s Strong, Positive Catalysts

During AMSC’s Q2 earnings call, McGahn had suggested that the company would benefit from utilities’ stepped-up spending on grid enhancement amid the proliferation of data centers. 

Earlier this month, on the Q3 call, the CEO was more bullish and specific about AMSC’s opportunity in this area. Specifically, he reported that utilities which are going to provide electricity for many data centers “are coming to us time and time again now with real distinct problems on the grid.” He added that this opportunity “seems like (it’s) starting to come to fruition…. (with) multiple projects, handfuls of projects from the same utilities that have the same problems that we can uniquely solve.“ 

McGahn noted that some of these utilities are reaching out to AMSC because they need more capacity, while others need to increase the quality of their power and still others need to direct power to specific places.  

Meanwhile, McGahn reported that India’s Inox Wind, the main purchaser of AMSC’s products for wind turbines, is “ramping up (its) production.” Indeed, AMSC’s wind revenue jumped to $9.1 million last quarter from $5.75 million during the same period a year earlier. 

And McGahn reported that the company had received almost $15 million of orders from Inox last quarter, indicating that Inox’s business is indeed sharply accelerating. Confirming the latter trend, in Inox’s quarter that ended in December, its revenue soared 81% year-over-year while its EBITDA jumped 123% YoY to $23.84 million. ‘

In the past, AMSC has cited the growth of semiconductor manufacturing as one of its core growth engines. With Trump threatening to impose 100% tariffs on semiconductor imports, the number of chip factories in the U.S. could very well soar, meaningfully increasing the overall demand for AMSC’s products. 

Valuation and Bottom Line on AMSC Stock

As of Feb. 19, AMSC stock has climbed 137% in the previous 12 months, gaining more than 27% so far in 2025. Further, its forward P/E ratio is an elevated 67.4 times.

But analysts are likely tremendously underestimating its EPS for next year as they expect it to come in at 57 cents, down from 61 cents this year. 

If its per share earnings instead rise by 25%, as seems likely given its rapid growth, the shares are changing hands at a forward P/E ratio of 40.8 times. That’s an attractive valuation for a company that’s expanding very rapidly and has multiple, powerful, positive catalysts. 

Disclaimer: At the time of writing, the author did not own any of the stocks mentioned in this article. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research or consult with a licensed financial professional before making any investment decisions. Past performance is not indicative of future results.

Larry Ramer is currently ranked 272 out of 30,647 financial bloggers analyzed by TipRanks, with a 15.2% return on his buy and sell ratings. He has been a long-time contributor to Insider Monkey, Seeking Alpha and InvestorPlace. He is one of the founding contributors to this newsletter.

He focuses on contrary investing and specializes in the renewable energy and consumer discretionary sectors. Among his highly successful, contrarian picks have been Plug Power, Exxon Mobil, solar stocks, and airline stocks. On the downside, he was an early predictor of the collapse of cryptocurrencies, marijuana stocks, Ocugen, and Meta Platforms.