TipRanks Smart Growth Portfolio #8: The Current Play
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Dear Investors,
Welcome to the 8th edition of the Smart Growth Portfolio and Newsletter.
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Note to Investors:
We’re officially in the middle of a global tariff war, and the ripple effects are hitting stock markets hard. Volatility has spiked, earnings visibility is almost non-existent, and valuation models are flying blind. It’s messy. Still, as we all know, markets always bounce back — it’s just a matter of when. Instead of getting lost in the noise, we’re zeroing in on what actually matters: strong fundamentals, resilient business models, and industries with staying power. When great companies trade at a discount to their peers or history, that’s our signal.
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Portfolio News and Updates
❖ Clearwater Analytics Holdings (CWAN) announced that it completed its acquisition of Enfusion, valued at approximately $1.5 billion. This strategic move positions Clearwater as the first unified, cloud-native front-to-back platform for institutional investors, enhancing its market position by integrating Enfusion’s front-office capabilities with its existing middle and back-office solutions. The acquisition is expected to expand Clearwater’s total addressable market and international presence, offering seamless integration and operational efficiency across asset classes and geographies.
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This Week’s Top Growth Pick: Itron (ITRI)
Itron, Inc. provides technology and services for managing energy and water resources, focusing on grid modernization, smart metering, and industrial IoT solutions. Its platforms enable utilities and municipalities to monitor, control, and optimize electricity, gas, and water distribution networks. With a portfolio spanning edge intelligence, data management, AI-driven analytics, and communication networks, Itron supports infrastructure automation and resource efficiency initiatives. The company integrates hardware, software, and analytics to improve grid reliability and operational visibility. Its approach emphasizes interoperability and adaptability across diverse utility environments. As utilities transition toward more distributed and digitalized systems, Itron’s technologies play a role in supporting grid stability, regulatory compliance, and sustainable resource management in response to evolving consumption patterns and environmental pressures.
Source: Itron, Inc. February 2025 Investor Presentation
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The Meter Reset
Itron was founded in 1977 as a provider of handheld meter reading technology for utilities. Over the following decades, the company expanded its capabilities across metering solutions for electricity, gas, and water, evolving into a key player in utility automation. A major inflection point came in 2007 with the acquisition of Actaris, transforming Itron into a global leader in smart metering. This move broadened its geographic reach and diversified its portfolio across multiple utility sectors.
In 2016, Itron initiated a strategic restructuring – consolidating its global manufacturing footprint, reducing its workforce, and simplifying its organizational structure to improve efficiency and reduce costs. This restructuring was part of a broader effort to shift focus from traditional hardware-centric operations toward higher-margin, software-enabled solutions and services. This restructuring marked an early step in Itron’s transition toward an asset-light, technology-driven business model.
The past five years have marked a critical phase in Itron’s evolution, defined by a shift from hardware-centric offerings to integrated, data-driven platforms. Responding to growing demand for grid efficiency and operational visibility, Itron invested heavily in IoT, edge intelligence, and AI-powered analytics. Strategic partnerships have been central to this transition – not only with Nvidia, but also with Microsoft, Schneider Electric, and Cisco. These collaborations have expanded Itron’s capabilities in AI integration, grid management, and advanced communication infrastructure, allowing utilities to streamline operations, control costs, and improve decision-making.
In 2021, Itron divested its underperforming hardware manufacturing operations to sharpen its focus on higher-margin software, services, and networked solutions. This pivot accelerated its transition toward a platform-based model, positioning the company to capitalize on utility digitalization and infrastructure automation. Selective M&A, such as the acquisition of SELC in 2020, reinforced its footprint in smart city solutions and asset management.
Operationally, Itron enhanced supply chain resilience by diversifying its manufacturing base and investing in digital supply chain management – critical moves amid global disruptions and tariff pressures. These challenges prompted a leaner, more asset-light strategy aimed at preserving margins and improving scalability.
Today, Itron operates as a technology partner focused on driving efficiency, automation, and cost optimization across utility networks. Its repositioning over the past five years reflects a deliberate shift toward scalable, software-led growth, underpinned by AI, IoT, and data analytics. With infrastructure demands evolving and utilities seeking to modernize without escalating operational costs, Itron’s recent trajectory has positioned it for sustained, innovation-driven expansion.
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The Thinking Grid
Operating at the intersection of critical infrastructure and digital intelligence, Itron delivers integrated solutions that enable utilities to manage energy and water distribution with greater precision and efficiency. Its business spans advanced metering, grid automation, and data-driven operational insights, serving electric, gas, and water utilities across regulated markets, municipalities, and smart city initiatives.
While Itron supports over 8,000 customers in more than 100 countries, it remains heavily weighted toward North America, generating 82% of annual revenue from the region. Minimal exposure to APAC – just 4% of revenue – effectively insulates the company from ongoing U.S.-China trade tensions.
Itron’s competitive edge lies in its integrated platform approach. Where its competitors often operate in silos – offering either hardware or fragmented software – ITRI combines devices, connectivity, analytics, and AI into unified solutions. This positions the company not just as a vendor, but as a long-term infrastructure partner focused on operational efficiency and automation.
Secular trends amplify this positioning. The rise of urbanization, expected to bring 70% of the global population into cities by 2050, coupled with the proliferation of data centers – which is projected to double their energy consumption by 2030 – are straining utility grids. Itron’s technologies provide critical tools for utilities to manage increased load, grid flexibility, and real-time visibility without resorting to capex-heavy infrastructure overhauls.
With strategic partnerships enhancing its capabilities in AI and grid intelligence, Itron is aligned with markets demanding actionable insights and cost-effective modernization. Its pivot toward scalable, software-led services offers meaningful upside as digitalization reshapes utility management worldwide.
Source: Itron, Inc. February 2025 Investor Presentation
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Scaling Smarts
Itron’s portfolio is built around three core areas: Networked Solutions, Device Solutions, and Outcomes. The backbone of its business is Networked Solutions – contributing 68% of total revenue – driven by large-scale deployments of advanced metering infrastructure and grid connectivity platforms. Outcomes – the software, services, and AI-led segment – accounts for 13%, but delivers the fastest growth and highest margins, cementing its role as the company’s strategic growth engine. Device Solutions, now 19% of revenue, remains a legacy segment with modest expansion tied to bundled hardware sales. Hardware production is now outsourced, allowing Itron to stay asset-light while retaining control over product integration.
The company’s competitive edge lies in its shift from siloed hardware offerings to integrated platforms combining connectivity, analytics, and AI. This repositioning aligns ITRI with the fastest-growing segments of the smart grid and Industrial IoT markets, where utilities prioritize efficiency, automation, and real-time intelligence. The shift toward software-led, data-centric offerings has redefined Itron’s profitability structure. AI-powered platforms – spanning grid optimization, predictive analytics, and intelligent infrastructure management – now generate the bulk of gross profit.
With a dominant position in North America’s AMI market – holding over 60% share in network endpoints – and leadership in smart electricity metering, where it holds a 34% share of the installed base, Itron operates from a position of strength. The company is structurally aligned with the fastest-growing segments of the smart grid and Industrial IoT markets, where demand for efficiency, automation, and real-time intelligence continues to accelerate. Its evolving business mix provides a strong foundation for margin expansion and sustained, predictable growth.
The company gained recognition in the 2025 Gartner® Magic Quadrant™ for Managed IoT Connectivity Services, Worldwide report:
Source: Gartner, Inc.
Itron’s integrated platform strategy not only streamlines utility operations but also embeds the company deeper into customer workflows. By offering interoperable solutions across electricity, gas, and water networks, Itron reduces switching costs and fosters long-term contracts tied to data services and analytics. This transition from one-time product sales to recurring software and services revenue enhances visibility and predictability – a critical advantage as utilities modernize aging infrastructure without expanding budgets. The result is a business model designed to scale alongside rising grid complexity and data demands.
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Intelligent Numbers
Itron closed fiscal 2024 with revenue of $2.44 billion – up 12% year-over-year – marking a new annual record. Growth was led by the Outcomes segment (+17%) and Networked Solutions (+14%), reflecting strong demand for software-led and recurring revenue solutions.
Profitability saw significant improvement. Non-GAAP operating income rose 48%, while adjusted EBITDA climbed 43% to $324 million. Gross margin expanded to 34.4%, benefiting from operational efficiencies and a favorable shift in product mix. AI-driven platforms now account for the majority of gross profit, with AI-linked offerings estimated to contribute up to 80% of total gross margins.
Source: Itron, Inc. February 2025 Investor Presentation
Non-GAAP EPS came in at $5.62 for FY2024, a 67% increase year-over-year. Free cash flow more than doubled to $208 million, providing flexibility for debt management and strategic investments. Itron ended the year with $1.05 billion in cash and a modest net leverage ratio of 0.7x, despite issuing $805 million in convertible notes to bolster liquidity and fund growth initiatives.
However, management’s guidance for 2025 points to a normalization phase. Headline revenue guidance of $2.4 to $2.5 billion appears flat year-over-year, but after adjusting for a $125 million one-time supply chain catch-up in 2024, underlying growth for 2025 is closer to 6%. EPS guidance of $5.20 to $5.60 reflects a higher effective tax rate, but normalized figures imply mid-single-digit earnings growth.
While margin expansion and cash flow generation remain intact, ITRI faces typical headwinds – including component costs, tariffs, and competitive pressures. Still, the company’s asset-light model, record $4.7 billion backlog, and rising software mix offer resilience in navigating short-term volatility.
With operational leverage kicking in and a clear runway for high-margin growth, Itron’s financial profile reflects a disciplined, scalable business – well-positioned to convert infrastructure digitalization trends into sustained shareholder value.
Source: Itron, Inc. February 2025 Investor Presentation
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Scaling at a Discount
Like many technology stocks – particularly those linked to hardware – ITRI surged in late 2024 before giving back some gains in early 2025. Still, the stock is up nearly 12% over the past 12 months, outperforming both the S&P 500 and Nasdaq Composite. Itron has also outpaced all but one of its industry peers.
Despite this strong performance, ITRI remains attractively valued, trading at a discount to the Information Technology sector average. It sits near the bottom of its peer group on TTM and Forward P/E, as well as P/S multiples. Based on projected cash flows, the stock appears over 30% undervalued, presenting a compelling entry point.
Wall Street maintains a bullish stance, with top analysts rating the stock a “Strong Buy.” The average price target implies ~24% upside over the next year, with some targets suggesting potential gains exceeding 34%. For investors seeking scalable growth at a reasonable price, Itron offers a rare combination of operational momentum, market leadership, and valuation support.
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To Sum It All Up
Itron is a leading provider of smart grid and utility intelligence solutions, enabling automation, efficiency, and real-time management across energy and water infrastructure. Its platform-based model integrates devices, connectivity, and AI-driven analytics, positioning the company at the core of grid modernization and Industrial IoT growth. A strategic pivot toward software and services has expanded margins and improved scalability, while an asset-light approach enhances resilience amid supply chain and tariff pressures. Despite outperforming peers and broader indices, Itron trades at a discount to sector averages. Backed by strong cash flow, a record backlog, and rising recurring revenue, Itron offers a compelling blend of operational strength, high-margin growth potential, and undervalued equity in a digitalizing infrastructure landscape.
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Smart Growth Portfolio
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Click here for more stock analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
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