First Segment

Final Segment 1 Title: 'Meter Made' .  .  .  .  . Featured Stock(s): Itron Inc. (ITRI)

.  .  .  .  .

JJC:    It's time for another green stock for Green Week...   And, considering how all my green picks did last year, up an average of 77%, versus -6% for the S&P 500, you probably want to pay attention to the stock... and the stock is... Itron Inc. (ITRI).

This is a company that helps companies measure... utilities measure and manage the flow of electricity and the flow of water...

Now, is that green?  You bet it's green!   Green isn't just about producing cleaner energy... It's also about conserving energy... using less energy. It's also about conserving water... which, by the way, I believe will be the next great global shortage, after oil and food.

How do they do this? ITRI makes the meters and the infrastructure that support automatic metering for electric, gas and water utilities.

This is company that makes its money selling machines that monitor and - here are the key words - optimize the delivery and usage of water and electricity. Automatic metering is all about making sure we don't use too much energy. That's smart, when energy costs as much as it does.

ITRI isn't just a company of meter readers. They collect the data and use their proprietary software to analyze it, and then better manage the flow of electricity and water.

Last Tuesday, Badger Meter Inc. (BMI) - which is similar to ITRI, except it's all water - reported a blowout quarter after the bell. The stock was up 22%. BMI... another really kind of prosaic stock...

ITRI's up 8.8% since then but, with it's $1.60, or 1.6%, decline today, I think it makes a great buy because, if BMI's doing well... I've got to tell you... I think ITRI is doing even better...

Why? ITRI is #1 in the automatic metering devices business domestically. It's got 50% market share. You know, when you've got 50% market share of anything, you are in control of your own destiny... Internationally, it has 20% market share.

ITRI's automatic metering contracts are ramping. 12 utilities in California, Michigan, Connecticut, New York, Maryland and Texas could award a total of 20 long-term contracts this year...

When you see something like this, what it means is we're looking at a host of potential catalysts... buy, buy, buy!    Every time a contract gets announced, it goes higher and higher.

Two utilities - San Diego Gas and Electric and Detroit Edison - could announce their contracts as early as the second quarter which, by the way, if you haven't noticed, we're already in!

These contracts should each be worth roughly $300-500 million if ITRI gets them. I mean, come on, this one could be good...

ITRI is also a ROW-er - a company that does the majority of its business in the rest of the world... which, as today's ugly market illustrates, something you really want in a stock.

Back in 2007, ITRI bought a company called Actaris, that helped boost their overseas presence. That was smart and prescient. And now international represents about 63% of ITRI's sales. Since only about 6% of worldwide utilities use automatic meters, this is huge! It's a barely penetrated market that ITRI's in a position to penetrate thoroughly.

Weak dollar, getting weaker... Earnings will be elevated, purely by the currency translation...

There is an upgrade cycle coming and, anytime you have an upgrade cycle, cycles can produce spectacular results, as new products spur new sales. It's got a new technology called Advanced Metering Infrastructure, or AMI... and ITRI has a handle on that. AMI is the next step forward in this business. It's like a new generation... with more realtime data than current systems.

I know, it's not a sexy business... I could do solar every night, right?... But, while ITRI may not look sexy, it's cheap versus its growth rate.

ITRI's long-term growth rate is 24.3%. Now, the stock took a hit today, so it's selling at 22x expected 2008 earnings. 23% growth? 22x price-to-earnings multiple?... You know my rule of thumb... When the fundamentals are good, any stock with a price-to-earnings multiple lower than its growth rate is under-priced.

ITRI falls into that category. So, even though it looks expensive... both from a dollar amount, but we know that's not true, because a price-to-earnings multiple makes it so it doesn't matter what the dollar amount that the stock trades at - when compared to its growth, it's not!

And compared to Badger Meter Inc. (BMI), the company I mentioned before that soared on great earnings, ITRI looks even cheaper. BMI has lower growth... 13.5% long-term growth, versus this one with 24.3%. And it's got a higher multiple. It's kind of an oddity. That one trades at 27x forward earnings.

Now there's no such thing as a no-brainer, okay... But, if ITRI trading at all like BMI, then the stock could really soar.

We were drawn to this one because it's Earth Day which, by the way, is the holiest day of Green Week... but this stock works during 51 other weeks, and also 364 other days...
 

.  .  .  .  .

The Bottom Line!:      Itron Inc. (ITRI) may not be flamboyantly green... more of a dull, subdued green... but it's in a great business and it's a cheap stock, and I think it goes much higher.