3 Reasons why PyroGenesis is a Great Stock to Buy
Written By: Marc Challande
Published June, 8th 2021
PyroGenesis Canada (PYR.TO), a leader in the design, development, manufacture and commercialization of advanced plasma processes, saw its stock price going from $0.55 to currently $7.07 in 2 years showing an impressive 1.285% growth. Here is why Pyrogenesis is a great stock to buy.
A Market which will keep growing
Pyrogenesis wants to be a leader in plasma-based solutions to the worldwide movement to reduce the carbon footprint in manufacturing. This is why the sector will keep growing. In 2019, the market size was valued at USD 47.63 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 3.7% from 2020 to 2027 or USD 61.43 billion.
Moreover, PyroGenesis is implemented in the additive market, which represents a $774 Million valuation and expect to grow to a $3.2 Billion market valuation in 2024. The market could quadruple fast.
The investors are very sensitive about the growth’s prospect of a company. The DROSRITE product ( explained underneath) is a nice proof of the evolution in the right way :
- 2016: 1st order $600K
- 2017: 2nd order from the same Client for $1MM
- 2018 : 2-system order
- 2019/2020: 7-systems ordered for ~ +$20MM
Still dubitative about growth prospect ? Pyrogenesis is currently in discussion with 3 clients about 3,000 torches for Iron Ore Pelletization. 1 torch is worth $3M Net Present Value. The market is in a desperate need of solutions and this market could represent a crazy $10B worth.
A Huge Growth
During the last earnings quarter report, PYR showed all its economical strength and the huge upside above them. Among the outstanding statements, we can highlight these ones:
- Revenues of $6,264,503, an increase of 771% over $718,908 posted in Q1 2020;
- Gross margin profit of $2,143,010 an increase of 701% vs. $267,414 in Q1 2020;
- Current Ratio at March 31, 2021 of 3.26x versus 2.20x at December 31, 2020 (versus 0.21x at March 31, 2020).
PyroGenesis has a strong position thanks to key partnerships and acquisitions (DROSRITE™, Additive Manufacturing, Plasma Torches, HPQ/PUREVAP™)
DROSRITE provides dross processing and metals recovery equipment and services to aluminum or zinc producers.
The main benefit about DROSRITE is there is no need to move the dross to another location, wait for cooling or run a mechanical step and there is no irritating salt waste. Furthermore, the systems recovers as much as 98%. Compared to their competitors, it is 20% more with a conventional method. The efficiency, gain of time, in the process lowers the operating cost and the carbon footprint matching with the company’s philosophy.
The key data here ? DROSRITE system sales and services contributed CA$2.7 million to the top line in the first quarter 2021, compared to the CA$2.5 million quarterly average in fiscal year 2020. Moreover, Pyrogenesis has recently received a LOI of an estimated $10M to $15M from an existing client.
Pyrogenesis also entered in a collaborative parnertship with HPQ Silicon (HPQ.V) leading to a new market opportunity and an innovative new product: PUREVAP™. This product can convert silica to “fumed silica” which can be used in a wild range of products such as batteries or in other consumer products. Talking about market opportunity, the silica market represented CA%1.6B in 2020 and expects to grow with a CAGR of 6.4% for the next 5 years.
Also, HPQ is well implemented in the fume silica sector with established sales and distribution network. Together, it will enable them to develop faster and further.
In the first quarter of 2021, the common product PUREVAP contributed to CA$625,086. This number could look small, but the potential growth could be astonishing in the future as both of the companies are getting along and look forward.
Fundamentals
The Stock Price is currently traded at $7.07 CAD with a 52weeks high of $12.14, and low of $1.53 (311% change) and a current market cap of %1.18B. The high Price/Sales ratio (50) is explained by the huge growth and the flood of big contracts. At Money,eh? we also focus on the percentage held by insiders. And the number is great. Few companies can boast to have a 49.26% .
Besides, a “small” concern could be the warrants. They currently are 3M warrants that could be fully diluted and could upset investors as it would bring dilution. For a reminder, a dilution augments the number of total outstanding shares and reduces the shareholder’s current asset’s value. The average exercise price of CA$1.68 for an incremental CA$5.0 million when fully exercised. Despite seeing this as a threat, it can also be seen as an opportunity of new capital. They currently have around $27M cash in their hands AND almost no debt.
What to Conclude about PYR ?
Pyrogenesis has great fundamentals, and is in the right market as the global warming is in everybody’s mind. They are the leader in their sectors, have made the right partnerships and the niche products that are highly needed. They have a big financial leverage with the cash in their hand enabling them to maybe acquire or develop new patented products. It is a stock that you might add to your portfolio and keep long term because contracts keep coming.
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This article solely expresses the opinion of the writer which might be disagreeing with the other writers of Money,eh?
