TOP IDEAS: A supplier to the oil industry, Titan Logix’s (TSXV: TLA) markets are in growth mode again and investors today can buy this business for free.

Investorfile has not posted an update on Titan Logix for several years now. Quite frankly, there was nothing to write about. Well, that may have changed.

Titan Logix’s stock was once big gainer for the Investorfile blog as one of our earlier Top Ideas. At its peak, shares in Titan Logix generated an investment return of 234%, 24 months after we published our first blog post about the Company back in 2012 (See: Titan Logix: Fluid in value and growing rapidly).

But, that was a long time ago, and today Titan Logix’s shares trade at a price less than half its historical highs, precipitated by the collapse of world oil prices over two years ago and what followed: Massive spending cuts by the oil and gas-related industries, the Company’s main market. As a result, the Company’s revenues and profits have plummeted since those heady days.

But, given where world oil prices are today, Titan Logix’s business prospects may be set for a nice recovery.

Titan Logix Corp. (TSXV: TLA - C$0.47) is an industrial technology company focused on manufacturing and marketing of advanced fluid management solutions. Today the Company's flagship products, TD80TM and TD100™ series of mobile gauges, deliver accurate level measurement, overfill protection, and a wide variety of integrated control capabilities to avoid costly downtime for repair and maintenance of mobile crude oil tankers. It is the market leader for electronic fluid level measurement and overfill prevention products for mobile crude oil road tankers in North America.

Recently, Titan Logix has invested in research and development to digitize its technology and introduce telematics to enhance its product data capture capabilities. This is to measure crude tanker truck driver productivity and delivery times, spillage and safety records, which can now be accessed wirelessly and remotely on the cloud.

After several years of slumping mobile tanker production, the demand for new crude oil road tankers in North America (the Company’s traditional market)is recovering. As such, the Company stated in its business outlook -filed in its most recent Management Discussion and Analysis (MD&A) -that the "market intelligence from tanker OEMs and North American Dealers indicates a strong demand for new tanker builds, resulting in an increase in demand for gauging and overfill prevention solutions in the crude oil sector.” This is very good news for Titan Logix, which should reflect most favourably in the Company’s future financial results.

For the first six months of fiscal 2022 (which ended February 28th), Titan Logix reported revenues of C$1.7 million, earned gross margins of 56%, but it had an operating loss of about C$575,000. We note that the operating loss during this period included some sizable one-time expenses and, in saying that, we feel the Company is positioned to break even in the near-term and become profitable some time in fiscal 2023 (beginning September 1),with the expected revenue growth to come from the renewed demand for its products.

Of significance is Titan Logix’s balance sheet: C$14.3 million in working capital, of which (as of today) includes over C$13 million (C$0.46 per share) of cash. The Company is cash-rich and debt-free.

Given our above-market prognostication, the balance sheet and the current market capitalization of Titan Logix (C$13.2 million), the value proposition becomes clear. Today small cap investors can acquire shares in Titan Logix at a valuation level equaling the amount of cash holdings in the business.

We acknowledge that Titan Logix’s stock price has been trading at cash levels for several years now. But, the conditions of the oil industry and its core markets has now changed very favourably for the Company’s business, which should drive future financial results and the stock price to trade at much higher levels.

The Company is also currently in the process of developing its long-term strategic growth plan, focusing on adjacent market opportunities in the mobile liquid measurement space, including environmental solutions, chemical, and agriculture. This is important, as Titan Logix’s new CEO needs to execute this plan and diversify product lines to serve more end markets and be less reliant on the oil industry in the future.

Of note for investors is that supply chain constraints and fluctuating lead-times can temper the Company’s revenue growth rate in the near-term.

For small cap investors, we see little downside (and plenty of potential upside) in owning this stock at today’s valuation levels given the Company’s strong cash position. Current market conditions are like déjà vu since we first recommended Titan Logix’s stock. But, this time investors can acquire the business for free and ride the wave.

Titan Logix has approximately 28.5 million shares outstanding.

The Company’s website www.titanlogix.com

Author Ownership Disclosure: TSXV: TLA- Yes

Note: Investorfile's share price accumulation initial target of $0.75 for Titan Logix Corp. was reached on February 5, 2013.

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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 information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

Investorfile.com is not engaged in an investor relations agreement with Titan Logix Corp. nor has it received any compensation from Titan Logix Corp. for the preparation or distribution of this article.

The author of this article has acquired and may trade shares of Titan Logix Corp. through open market transactions and for investment purposes only.