Calm amid the stormFLIR: stimulus makes company an even more attractive investment

When analysts talk about FLIR, they think of its thermal imaging systems used by troops in Iraq and Afghanistan, and by law enforcement at home. The company’s thermal imaging technology, however, is also useful for energy conservation — and the stimulus package-related large investments in energy efficiency and continued robust defense and homeland security budgets combine to make the company an attractive target for investors.

his is the reasoned conclusion of Tom Konrad, an investor and blogger specializing in renewable energy and energy efficiency companies. He has a Ph.D. in mathematics from Purdue University (our condolences, Tom, on the loss of the Boilermakers to the UConn Huskies), and is a level III candidate for the Chartered Financial Analyst designation. When Tom Konrad speaks of energy stock, people listen.

The other day he offered an interesting analysis of why investors should keep a close eye on FLIR Systems (NASD: FLIR) (Konrad notes that he has a long position in FLIR). In late 2007, he highlighted the company as a way to participate in the growth of the energy auditing industry. He says he was ambivalent about the company at the time: Yes, he liked the potential growth story, but felt the stock was overvalued.

Times change. FLIR has fallen about 35 percent since late 2007, and 50 percent since its peak in July 2008 (at the same time that revenues have grown about 50 percent), prompting Konrad to give the company another look.

Infrared stimulus
Konrad writes in Alt Energy Stock that weatherization of low income housing and federal building retrofits are a major component of the American Recovery and Reinvestment Act (informally called he stimulus package). This will require the hiring and training of thousands of new energy auditors, for whom infrared (IR) imaging is an extremely versatile tool, both in terms of finding out what problems need to be fixed, and for convincing the customer that they are necessary (see Konrad, “How Infrared Imaging can Sell Energy Efficiency,” 18 December 2007). Now, IR imaging is not necessary for an effective energy audit, but it is increasingly becoming part of the energy auditor’s standard kit. “I expect that new energy auditors are likely to flock to the technology because of its strong visual appeal,” Konrad writes. In addition, it requires training to use IR cameras properly, a service which FLIR also provides.

Because an IR audit is cheaper than a full energy audit, some state weatherization programs or utility Demand Side Management (DSM) programs will