Forget Tesla: This Is The Best Way To Profit From Electric Cars

But now the reversal is in play, on both the chart and the income statement. Polypore’s recent second-quarter results saw a huge rebound in lithium-ion battery sales, jumping more than 150% from last year to $42 million as electric car sales once again surged higher. The company also reported impressive margin strength, reporting an operating margin of 75%. That big rebound has gone a long way to support sentiment, earnings and shares.

But that impressive turnaround is just the beginning of a long-term trend. Because Polypore is in position to cash in on booming electric car sales. August was a record month for domestic electric-car sales, jumping an eye-popping 50% from the previous month, to 11,363. And that trend is showing no sign of slowing, with year-to-date electric-car sales of 60,000, already well past last year’s total of 53,000. Polypore will continue to benefit from supplying industry-leading electric-car makers with lithium-ion battery technology.

The good news has analysts looking for big returns from Polypore, calling for 38% earnings growth in 2014 and average annual earnings growth of 16% in the next five years.

Risks to Consider: Polypore’s lithium-ion division will be driven by sales volumes in electric cars. Weakness in 2012 before a big rebound in 2013 underscores how vulnerable the high-growth electric-care industry is to short-term fluctuations in demand.

Action to Take –> Polypore’s most important division is back on the mend after a tough 2012. That has shares stabilizing after a sharp 43% drop in the past two years. Although that contraction did sweeten the valuation, Polypore isn’t exactly a value stock. Shares currently trade with a forward P/E (price-to-earnings) ratio of 35, which is a premium to 10-year average of 23 and peer average of 18. But as a growth stock with mounting momentum and big long-term potential, Polypore is still a buy at current levels and below $45.

This article was originally written by Michael Vodicka and posted on StreetAuthority.

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