Power Solutions International: Upgrading On Vastly Improved Results And Bargain Valuation - Strong Buy

Power Solutions International reported much better-than-expected second quarter results with strong profitability and stellar cash generation. While the company continues to be impacted by data center project delays and weakness in legacy markets, management reiterated expectations for strong improvement in the second half. Following a multi-month selloff, shares are trading at bargain levels. Even when assigning a rather undemanding valuation of 12x estimated 2027 EV/Adjusted EBITDA, upside would be well north of 100%. Consequently, I am upgrading the shares from "Buy" to "Strong Buy" with a price target of $81.