Orion and the Fluorescent Renaissance


Tired of the same old ethanol and solar-panel stocks? The word in some quarters, including a recent appraisal from Investors Business Daily, is that an up-and-coming trend is…fluorescent light bulbs.

Snicker if you must, but that notion is receiving some validation this week on Wall Street with the successful IPO of Orion Energy Systems (OESX). Orion, a 13-year-old company based in Plymouth, Wisc., went public Wednesday at $13 a share and promptly shot up 65 percent to $21.41 at the end of its first day of trading. On Thursday, it pulled back a bit, to close at $19.85 — but that level was still 53 percent above its offer price.

That’s the best post-IPO performance of any company going public in more than a month, and not bad for a company braving the markets a week before the IPO dead zone known as the holiday season. NetSuite did it, as did Orion; but shares of the others, including Gushan, which went public this week with a cloud or two hanging over it, is basically flat with its $9 a share offering price.

What’s the big deal about fluorescent lights, which have been making complexions look ashen and mottled in millions of offices for decades? They have gotten brighter and throw off more natural light, powerful enough to light up cavernous spaces, while remaining much cheaper and energy efficient than the standard high-intensity discharge lights. As IBD summed it up:

Fluorescent lamps … have traditionally been used only for ceilings lower than 15 feet or so. For big rooms — like warehouses and factory floors — they’re too dim and diffuse. Orion, though, offers high-intensity fluorescent, or HIF, lighting. Thanks to technological fiddling, HIF is bright enough to light even humongous indoor spaces.

All told, Orion has installed 971,000 HIF lighting systems. Many of the customers who need to light up such large spaces are Fortune 500 companies. Indeed, Orion has installed its systems inside 78 of them, including Coca-Cola, General Electric, and Toyota. A graphic at the top of its prospectus lists a dozen or so additional big brands: Anheuser-Busch, The Gap, Kroger, Pepsico, Crate & Barrel, and so on.

In addition, Orion sells its InteLite intelligent lighting controls and the Apollo Light Pipe, which uses lenses to collect and focuses daylight into a facility in a way that consumes no electricity.

Orion pitches itself as equal parts green play and cost-cutting tool. A flash image on its site — a takeoff on Times Square’s National Debt Clock or the Census Bureau’s population clock — ticks off both dollars and carbon dioxide. In six years, Orion claims to have saved companies $262.5 million and removed 6.8 billion pounds of carbon dioxide emissions.

Somehow, I’m doubting that it was those numbers that got investors interested in Orion’s IPO. Instead, it was strong revenue growth rates year after year, along with a recent rise in profit margins across the board. Both of those bode well for Orion’s future financial performance.

Profit Margins at Orion Are Rising

After growing 53 percent in fiscal 2006 and 45 percent in fiscal 2007, revenue at Orion rose 73 percent in the six months through Sept. 30, 2007. Along with that accelerated growth rate, the company is seeing margins rise: Operating margin went to 10 percent in the last six months from 2.5 percent a year ago.

Orion is a small but growing player in a developing sector. One only needs to look at the stock of LED maker Cree (CREE) — so far this year it’s gone from $15 to $34 and back down to $22 — to see the risks that could lie ahead for Orion. Divergent expectations can make for a volatile stock. But for now, Orion is having a good run right out of the gates.

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