Shares are up 185% in value and
EcoSynthetix (TSX: ECO) may still be the most undiscovered green stock in North America.
It has been 13 months since
Investorfile introduced EcoSynthetix as one of its Top Ideas in an April 2020
blog post (See: EcoSynthetix
is a value buy stock with green products and loads of cash). From the date
of our post until today, the stock price of the Company's shares is 185%
higher. Given the significant price appreciation during the past year, one
would think the Company has garnered a lot of investor attention. But, in our
opinion, EcoSynthetix may still be the most undiscovered green stock in North America and now the Company is on the verge of
windfall in revenue growth from the sale of its green products to multinational
Based in Burlington,
Ontario, EcoSynthetix Inc. (TSX:
ECO – C$4.84) is a renewable chemicals
company specializing in bio-based materials that are used as ingredients to
produce a wide range of "green” end products. They offer a range of
sustainable engineered biopolymers, commercial-ready
products that are cost-competitive and exhibit similar performance
characteristics compared to the non-renewable products
they replace. This allows their customers to provide greener
alternatives for their products by reducing their use of harmful materials,
such as formaldehyde and styrene-based chemicals.
EcoSynthetix has developed green
technology platforms that produce biopolymer
products manufactured from naturally derived feedstocks. The biopolymers the
Company manufactures replace toxic adhesives (glues) that historically have
been used in everything from particle board used in furniture to hair gel, and
Fortunately for EcoSynthetix, times have changed and
there is currently a significant movement by major consumer product companies
to achieve climate neutrality by offering to produce products that use green
inputs alternative such as a non-toxic and bio-based glue.
DuraBind biopolymers produced by EcoSynthetix, is a green
binder system used in the production of wood composite panels. DuraBind is
a sustainable no-added-formaldehyde (NAF) solution for use in the global wood
binder market. The pace of change is accelerating for the use of NAF
binding solutions to decrease the climate footprint in the production of wood composite
panels, especially those used in home furniture products and surfaces.
The Company has already publicly
disclosed that the major
laminate flooring and wood materials manufacturer, the Swiss Krono Group, has a
new line of environmentally friendly particle boards. They use EcoSynthetix’s DuraBind as
the bio-based adhesive to respond to growing consumer demand to use green-based
materials in its products. While the news of Swiss Krono being an EcoSynthetix customer is not new, Management commented (in
Company’s recent Q1 investor call) that, for the first time, product demand
from Swiss Krono is beginning to represent
quite a meaningful part of the Company’s new business, and it is optimistic
this growth will be reflected in its financial results in a more material way later
this year and beyond.
But this is not the only new business opportunity for EcoSynthetix’s DuraBind
product. We noted in our last blog post that the major furniture retailer IKEA
has publicly stated that it is putting a great deal of effort and resources
into lowering formaldehyde emissions, targeting the adhesive used in producing
the wood-based products that they sell.
EcoSynthetix’s Management has
acknowledged that a major strategic partner (we strongly speculate that to be
IKEA) performed an extensive evaluation of the Company’s DuraBind product. Again, in the Company’s recent Q1 investor call, Management
made comment that it hopes to soon to be able to speak about this major
strategic partner in the wood composite market. Management has acknowledged
that this partner is now ordering the DuraBind product and it is getting incorporated into its partner’s furniture end
products. We suspect a continuation of the business
relationship with IKEA could lead to a windfall of revenue growth for
EcoSynthetix beginning later this year and beyond.
The paper and wood composites market is not the
only near-term growth drivers for EcoSynthetix. There is serious commercial potential for
EcoSynthetix's green solutions in the personal care market, as the Company’s biopolymers can act as the fixative agent in hair
gel formulations and is a drop-in replacement for polyvinylpyrrolidone (PVP),
which is a petroleum-based product currently, used in most hair fixative
In 2019 EcoSynthetix signed an exclusive marketing and
development agreement with an unnamed multinational company (we speculate that
it is Dow Chemicals) to launch an all-natural line of hair care products. It is
now expected that the hair gel products developed under this agreement, which
use the Company’s biopolymer solution,
will be available on store shelves in the second half of 2021. This all-natural
line of hair care products is currently being marketed to major hair care
We suspect that EcoSynthetix's relationship with Dow will
expand beyond hair care products for the development green home care
In Q1 of
2021, the Company reported revenues of US$3.67 million, derived mostly from
sales in its legacy market, paper coating. But, we feel EcoSynthetix may be at that inflection point and that the
sales mix for the reminder of 2021 will begin to have a higher contribution from
the wood composite (Swiss Krono, IKEA) and hair care (Dow) markets. If this
occurs, Investorfile is of the opinion that the Company and the stock will
garner attention from a much wider investor audience as a green investment
play. If this is the case, the stock price still has significant upside potential and will trade at higher valuation levels.
Today the Company remains extremely well
capitalized with US$41.9 million in cash and no debt on its balance sheet.
EcoSynthetix Inc. has approximately 57.2
million shares outstanding.
Company website: www.ecosynthetix.com
Ownership Disclosure: TSX: ECO – Yes
share price accumulation target of $2.20 for EcoSynthetix Inc. was initially
reached on June 5, 2020.
This article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no responsibility
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Those seeking direct investment advice, should consult a qualified, registered,
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Investorfile.com is not engaged in an investor relations agreement with EcoSynthetix Inc. nor has it received any
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The author of this article has acquired and may trade shares of EcoSynthetix Inc. through open market
transactions and for investment purposes only.