H2O Innovation Inc. (HEOFF)

The company went from negative earnings -4.23M$ to positive earnings of 3.12M$ in 1 year, this is an increase of 7,35M$ in absolute values. This is a big increase in profit acknowledging that revenues didn't skyrocket. This is a good sign that the company is more cost effective. The majority of the revenue is Recurrent (90%) this indicates stability in the revenues. If you combine the increase in margins and being more efficient at generating profit from the revenue with the fact that the revenue is highly recurrent, it means that every new contracts is adding a lot of value because turning them into future profits is going to be secured for many years Ahead. If you add the fact that the company has very very little Net debt this means that the company isn't any close to go bankrupt anytime soon and is able to continue expanding by making new acquisitions and creating synergies. Let me know what's your opinion on this.

In the newspaper today!

* With its acquisition of two operation, maintenance and management (O&M) services firms in the U.S. Northeast, Canaccord Genuity’s Yuri Lynk increased his H2O Innovation Inc. (HEO-X) target to $3.75 from $3.25, exceeding the $3.51 average, with a “buy” rating, while Acumen Capital’s Nick Corcoran bumped up his target to $3.50 from $3.25 with a “buy” recommendation and Raymond James’ Michael Glen moved his target to $3.75 from $3.50 with an “outperform” rating.

“As a water pure-play, we believe HEO is well positioned to benefit from multiple secular growth drivers such as population growth and a large water infrastructure deficit,” said Mr. Lynk. “The U.S. Infrastructure and Jobs Act, which sets aside US$50-billion over five years for water, could drive double-digit organic growth in 2023 and beyond.”

"The first large-scale industrial project won by the Corporation is for the supply of a water treatment system for an automotive customer, following the engineering portion already signed and announced in January 2021. H2O Innovation will deliver two identical reverse osmosis (“RO”) trains each rated for 404 gpm (2,200 m3/day), skid packages for clean-in-place (“CIP”) system, chemical dosing kits and flush pumps. "
More projects from Tesla, this is good news for their relationship and potential future projects. We can assume the first contract in January went well and Tesla was satisfied of H2O Innovation's services.

HEO has a presence in Texas, where there is a massive water crisis taking place in some areas. On a macro level, optics of their presence with ongoing crisis may be causing some negative sentiments amongst investors at the moment (glass half empty perspective). However, (glass half full) this could be a moment for HEO to shine if they can seize an opportunity to repair the situation, implement their technologies in the process and excel. Time will tell.

From HEO website under Contact Us:

"To our customers in the Houston, Tx area who are experiencing problems associated with the recent severe weather, please know that we are doing everything we can to support you. We are experiencing an extremely high call volume at this time, and are dispatching our team around the clock to make repairs and restore services. Please continue to call the number of your local (TX) office below."

H2O Innovation has been awarded an operations and maintenance contract for an industrial effluent treatment facility
at an agri-food processing facility in Calgary, Canada. The
4,000 m3
/d (1 MGD) project is the company’s largest MBR
installation.

Source: Water Desalination Report 5/24/21

Good company that is very transparent with their shareholders. I really like HEO's business model - it's not just a pure play in water treatment plant installs, it has higher margin solutions and recurring contracts that keep revenues stable.

HEO has made some significant changes to its balance sheet recently, but up until the changes, the firm's financial statements were pretty good for a TSX.V firm (5 straight years of revenue growth, + operating income in 2020 per tmx money, great current ratio as of 6/21 56 CA/28CL, improved, + cash position 3 years in a row).

Like the industry (water is essential to life), like the business model, like the company. Could be an acquisition candidate. Lacks buzz in a sector that lacks excitement.

ESG ETFs are becoming very popular, if this stock continues to grow like this and gets listed on the TSX it's going to be very huge. I don't think you should worry much, the compagny is in an essential sector (water) which is becoming a growing concern every day. Not so many people know about the stock yet but it's doing everything right: good acquisitions, ISO certification for quality, it had contracts with big players like Tesla and Amazon. It might not 2x in the next months, but remember every contract retains the client (reccurint revenus) which makes this company less risky and every contract is just adding to the backlog.