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The stock is up 235% and EcoSynthetix still has attractive upside
Posted by: Gerry Wimmer
03/20/2022
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The uptake in demand for EcoSynthetix’s (TSX: ECO) renewable bio-based products is showing up in its financial results and outlook.





This is 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 (See: EcoSynthetix 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 than ever.

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 displaced.

EcoSynthetix’s 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:

1. The 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 implemented.

2. The positive outlook for an existing vertical market – Personal Care: 
To begin 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.

3. 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.

Despite’s 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.


Read Disclaimer:

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 EcoSynthetix Inc. nor has it received any compensation from EcoSynthetix Inc. for the preparation or distribution of this article.

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

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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.