Opinions
Bruce Campbell (2)
Hammond Power Solutions Inc.
HPS.A-T
PAST TOP PICK
Aug 18, 2025
Stock price when the opinion was issued
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Premium contentWe reiterate this electric transformer manufacturer, involved in data centre and cloud projects, as a TOP PICK. Recently reported earnings showed a 5% increase in year on year sales and a 17% increase in backlog of orders, which is great timing considering their new production factory is expected to open sooner than expected. It trades at 14x earnings, 3x book and supports a robust 31% ROE. We recommend trailing up the stop (from $70) to $80, looking to achieve $131 -- upside potential of 28%. Yield 1.1%
(Analysts’ price target is $148.25)Premium contentPremium contentPremium contentThe results were a bit weak on the growth margin side and the backlog decreased a bit. There is huge demand for new data centres and this is good for Hammond Power. He started accumulating it this year. There is a new plant opening up which will be very efficient for electrification demands.
Premium contentOur PAST TOP PICK with HPS.A has triggered its stop at $113. To remain disciplined, we recommend covering the position at this time. Along with our previous guidance, this will result in a net investment gain of 28%.
Scores 9 for fundamentals, and 4 for value. The street targets 24% upside. Q2 reported record revenue though gross profit margins dipped due to input costs. Could be vulnerable to rising raw materials costs and supply chain disruptions. They still lead in their industry with a dominant footprint. Data centre demand could be a driver.
It manufactures dry transformers to provide power. They have a strong backlog and demand. The weakness in the stock reflects the cost over-runs on the new facility in Mexico which has been a drag on earnings. Tends to have choppy quarters.