ERTH analysis worth readingFrom CEO.ca:
Company is forecasting $28M of revenue (per slide 14 of their most recent presentation) in 2022 which it should have extremely high visibility on given its driven by a straight-forward expansion of its Beiseker facility - this expansion is already underway via a recent Twitter post. Applying a conservative 15%-20% EBITDA margin on that revenue equates to $4.2M-$5.6M of EBITDA in 2022. Applying a very conservative 10x NTM EBITDA multiple equates to a valuation of $42M-$56M or 200% upside to today's value. And this is just on today's assets (with the near-term and fully funded Beiseker expansion). This target also implies just a <2x NTM sales valuation. Find me another high-growth, clear ESG, profitable micro cap that trades at just 2x NTM sales.
And none of that analysis includes the Bethune facility - which is very advanced and nearing FID. The company projects this facility to be online in late 2022 and drive 2023 revenue to over $100M. At 15%-20% EBITDA margin that equates to $15M-$20M of 2023 EBITDA and at 10x valuation that's $150M-$200M EV valuation. Assumeing this project costs $30M of debt and equity (rule of thumb is $150 per tonne of capacity), that would put the pro forma EV (at current share price) at $45M vs. a reasonable EV valuation of $150M-$200M.
Then there's the positive indicators: 1) CEO purchased almost $120k worth of stock this summer at $0.35 (currently under $0.20) + other insider purchases; 2) company just issued a private placement (to fund Beiseker expansion) at above market value ($0.20/share) with warrants that expire in ONLY 6 months from issuance (April 2022). So in the last 6 months the CEO purchased a large amount of stock well above today's value + issued securities (likely to some of his core shareholders) at above market value with very short term warrants. This tells me he is very optimistic around the near-term outlook of this company.