The uptake in demand for EcoSynthetix’s (TSX:
ECO) renewable bio-based products is showing up in its financial results
Investorfile’s third blog post about the green company EcoSynthetix Inc. (TSX:
ECO – C$5.70). Thus far, the stock price has performed brilliantly.
It was in April
2020, at the beginning of the Covid outbreak, that Investorfile first
profiled this Company as one of our Top Ideas for a small cap value investment
is a value buy stock with green products and loads of cash).
Thirteen months later, with the Company’s shares trading 185% higher in value, we
doubled down with another blog post about this stock, suggesting that investors
should pay more attention to EcoSynthetix’s growth story (See: EcoSynthetix
is signaling that big demand for its green products is nearing).
Today, in a tough market for small cap
stocks, the shares are up 235% and EcoSynthetix’s revenue growth and future prospects look stronger
EcoSynthetix Inc. offers a range of sustainable engineered biopolymers
that allow customers to reduce their use of harmful materials, such as
formaldehyde and styrene-based chemicals. The Company’s flagship products,
DuraBind, Bioform, and EcoSphere, are adhesives or binders used to manufacture
wood composites, personal care, and paper and packaging that also enable
performance improvements, economic benefits — along with being
environmentally friendly. EcoSynthetix’ bio-based products are
offered at very competitive pricing, with equal or superior
performance relative to the traditional chemicals that are being
green technology platform produces biopolymer
products manufactured from naturally derived feedstocks, mainly from
cornstarch. 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 more. As times have
changed, there is currently a significant movement by major consumer
product companies to achieve climate neutrality by offering products that use
green input alternatives
Today, EcoSynthetix’s bio-based products are used globally as
inputs in the commercial manufacture of a wide range of consumer and industrial
goods. The Company is providing its customers with opportunities to
significantly reduce their carbon footprint. In 2022, EcoSynthetix is on course to become a "Climate
Positive Company” by producing and
selling products that save more greenhouse gas emissions for its customers than
the Company is generating.
First evidence of the increasing demand for
EcoSynthetix’s flagship green products is in the
Company’s Q4 and year-end results ending December 31, 2021. Net sales
year-over-year grew over 46% in Q4 to US$4.9 million. Annual sales in 2021 were
up nearly 33% at US$18.2 million. During 2021, EcoSynthetix generated
positive cash flow from operations and ended with approximately US$41
million in cash on its balance sheet. The Company also still has no debt.
While the last 12months’ financial results were encouraging
for the Company, the near and far term outlook is strong. This conclusion is
based on the text from the most recent earnings call transcript (February 25,
2022) by EcoSynthetix’s Management, highlighted by the following:
positive outlook for an existing vertical market - Wood Composite: Today
EcoSynthetix has two commercial accounts (Swiss Krono and IKEA) for its
DuraBind product as the adhesive for the fabrication of wood composite panels
used in manufacturing furniture and flooring products. The first commercial
production line at IKEA is now up and running, which is worth about US$5
million in sales annually (one line) for the Company. These two wood composite
accounts represent over 20 production lines in total across its two
networks or about US$100 million in sales annually for EcoSynthetix when fully
positive outlook for an existing vertical market – Personal Care:
2022, the Company says it is seeing good momentum of new orders for
EcoSynthetix’s hair fixative ingredients used in all-natural hair gel products.
EcoSynthetix is partnered with the multinational company Dow Chemicals and the first
product with the Company’s formulation has been launched now that the market
conditions for new hair products are improving in a post-pandemic environment.
New major vertical market emerging – Wet End of paper
manufacturing: EcoSynthetix has recently secured its first commercial
account to use the Company’s biopolymers to improve the strength of the fibre during
the formation process of tissue paper. For this commercial account (the "wet end”
production line for one of the world’s largest paper mills), EcoSynthetix’s
bio-based ingredients have already enabled cost-savings, strength improvement
and higher line speeds. According to Management, this Wet End market vertical
could represent the biggest market opportunity for EcoSynthetix to date.
the stock’s robust performance since Investorfile’s first blog post we still
see attractive upside to the Company’s share price. This is based on the improving
financial trends in the near term, the aforementioned catalysts above and the
potential for greater institutional investor interest in this "Climate
Positive” growth story as Management continues to execute. We note that TD
Securities recently launched research coverage on EcoSynthetix Inc. with a
12-month share price target of C$8.50.
Of note to investors, recent supply chain constraints of cornstarch, an
input ingredient used by the Company may create some short-term operational
challenges for deliveries if the demand for EcoSynthetix green products
escalates extremely fast.
EcoSynthetix Inc. has approximately 59 million
shares outstanding. The Company continues to be active in the buyback of its
own stock in the open market under its Normal Course Issuer bid.
Company website: www.ecosynthetix.com
Author Ownership Disclosure: TSX: ECO – Yes
Investorfile's 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 to update the information contained in this article. The
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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.