In the world of investing, winners stay in the spotlight while laggards get pushed into the shadows.

Often times, these stocks get pushed off the radar as investors brace for a period of operational headwinds. Yet as those headwinds abate, opportunity knocks.

That’s the set-up in place for Itron, Inc. (Nasdaq: ITRI), one of the world’s leading providers of water, electric and gas meters for use in homes, commercial buildings and industrial settings.The company’s share price slid nearly 15% since February 2013, while the S&P 500 has surged more than 35%.

To be sure, Itron has been through the ringer, as long-term contracts expired, new contract signings have been postponed and public spending on infrastructure has lagged. The company’s revenue base shrank from $2.43 billion in 2011 to an estimated $1.95 billion this year. A lack of profits in three of the past five years surely impacted shares as well.

Despite the company’s 2014 headwinds, I think Itron is turning the corner and could be poised for a nice run in 2015 and beyond.

Growing Some Smarts

The meter business has steadily progressed with the times, as has Itron’s product line-up.

Four decades ago, the company mainly sold low-tech electrical meters that required a periodic visit from a meter reader.

Since then, Itron built a line of advanced meters with a one-way communication module that collects and stores utility usage data. The results can be transmitted to a mobile device or a fixed network used in the analysis of resource usage and billing.

The company’s highest-tech offerings, smart meters, provide the most functions. These include collecting and storing utility usage data over time, two-way communication enabling remote operation and data transmission and interfaces with other devices like in-home displays, smart thermostats and much larger interconnected networks.

Itron also sells software packages that help consumers and building managers optimize energy use in homes and commercial settings. It’s working with utility companies, too, to develop integrated smart-grid technologies that could help revolutionize water and power management on a broad scale.

Simply put, Itron is right in the thick of the growing movement toward cleaner, more efficient and more sustainable energy and resource use.

Itron’s recent problems stem from the fact that demand in the United States for advanced meters has stalled. The company is attempting to foster growth by tapping international markets.

Some of the best growth opportunities are in Western Europe, particularly Spain, France and the U.K., where demand for smart meters will total about 93 million units through 2020, according to projections by market research firm Navigant Research. Together, China, India and Japan will need hundreds of millions of smart meters during the next decade or so.

Globally, the smart meter market will expand 50% to $6.6 billion in 2023 from $4.4 billion last year, Navigant estimates.

Itron is now seeing modest revenue gains after a series of declines in prior years.  

Looking ahead, I expect international markets will deliver a boost to Itron’s financial performance as the firm ramps up overseas sales efforts.

On November 26, for example, the firm announced a deal to provide smart meters for AES Eletropaulo, a major Brazilian utility with 6.8 million customers that recently began a smart grid project in the city of Barueri.

Itron has been expanding its Asian presence for several years. It opened a high-tech meter manufacturing facility in Southeastern China in 2012 to facilitate the country’s efforts to streamline energy use.

#-ad_banner-#In India, a 2013 contract with the infrastructure development firm SPML was established to provide 90,000 advanced meters for several areas of New Delhi, India’s capital city. Itron’s water meter factory in the Dehradun district of India handled the manufacturing.

Backlog figures highlight a clear positive trend. The company booked $514 million in new orders in the third quarter (up from $478 million in the second quarter), helping total backlog to rise sequentially, to $700 million from $675 million.

Those gains are being muted by a global restructuring effort which will cost Itron $65-to-$75 million during the next few years. But after that process is complete in 2016, the company will save about $40 million per year in operating expenses, according to management.

Risks To Consider: Itron’s financial performance can be choppy at times because the firm is so closely tied to the utility sector, where meter demand can vary substantially with factors like construction trends, availability of government subsidies and overall economic conditions.

Action To Take –> With its business recovering, Itron is well-positioned to meet consensus projections for earnings per share of $1.63 this year, followed by 11%-a-year growth for the ensuing five years. Assuming a more conservative price-to-earnings ratio of 25 — the industry average is currently 29 — this implies about 70% upside potential for the stock through 2019. Investors seeking a likely turnaround play for 2015 and beyond should consider Itron.

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