Eltek Ltd. (NASDAQ: ELTK) is today’s big gainer so far with gains of more than 2x since yesterday’s close. Strong earnings reported in the premarket have led to excitement and early volume more than 83x what we see in an average day.
What Is Eltek?
Eltek is a global electric power conversion specialist. The company develops and markets systems for multiple applications in sectors like the industrial sector and the telecommunications sector. Based in Norway, the company had about 2,000 employees spread throughout 40 different countries in 2018.
A Shift To Positive Earnings Leads ELTK Stock On A Run
Unfortunately, Eltek has seen dramatic declines over the past year as concerns with regard to profitability have drug the stock to new lows. Nonetheless, this has set the stage for the incredible movement that we’re seeing today.
With the stock recently trading in record low territory, the data suggested that the stock was oversold. This, combined with strong fundamental data led various technical indicators to light up, with fundamentals driving investor interest and technical data driving trader volume.
So, what was so special about Q1 earnings? Well, it’s the fact that the company earned something. As mentioned above, profitability has been a longstanding concern.
However, in the first quarter of 2019, the company generated $8.7 million in revenue with gross profit margins climbing to 17.6% from 5% one year ago. This brought operating profits to $433,000 and net profits to $242,000, or $0.12 per fully diluted share. In the same quarter last year, Eltek reported a loss of $0.33 per share. This shift to profitability seems to be the source of excitement.
After all, the company has been preaching that it is working to turnaround the long-lasting blues that it has been facing. However, today’s strong earnings show that the company is walking when it talks and doing something to bring value to investors.
Although, we’re only talking about one solid quarter here, should the company turn this into a trend, there is serious room for long run growth, even after today’s gains.
We are glad that this quarter’s results reflect the implementation of the first stage of our turnaround plan, which we started during the last quarter of 2018. We continue in our efforts to further increase operating efficiencies, to improve customer satisfaction, to formulate a more effective sales strategy and continue implementing our plan to reach sustained profitability.
Today’s run is a great thing for Eltek and those that hold shares. The big question that will lead ELTK on long run gains or back to the blues is whether or not it can keep up the solid momentum. While that’s yet to be seen, whatever the company did in Q1 to lead to such strong growth in margins and profitability is impressive, making the stock one worth watching.
What Do You Think?
Where do you think ELTK stock is headed moving forward? Join the discussion in the comments below!