A Good Opportunity Under Biden In the initial few months of the Joe Biden administration, we saw several major themes emerge. One top focus... Perma-Fix Environmental Services, Inc: This Green Stock Could Double

A Good Opportunity Under Biden

In the initial few months of the Joe Biden administration, we saw several major themes emerge. One top focus is the green energy space after the U.S. rejoined the Paris Agreement on climate and established green policies to move toward carbon neutrality.

The push to achieve lower carbon emissions will benefit many companies, including micro-cap Perma-Fix Environmental Services, Inc. (NASDAQ:PESI). The company provides nuclear and mixed-waste management solutions comprising treatment and cleanup services.

Perma-Fix Environmental has been around for three decades, but PESI stock’s price has moved little since trading at nearly $40.00 in 1993.

Now with the focus on green energy, Perma-Fix Environmental Services, Inc. appears to be positioned in a much better operating environment, but ultimately, the company still needs to execute on its fundamentals.

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Why PESI Stock Could Double

A look at the following Perma-Fix Environmental Services stock chart shows indecisive trading since 1993. Over the past three decades, PESI stock has failed to mount any sustained upside move.

Chart courtesy of StockCharts.com

But there is some hope. Perma-Fix Environmental Services stock appears to be on the verge of breaking out toward $10.00 from its current sideways channel if the stock can hold at its current level.

If Perma-Fix Environmental Services, Inc. can deliver better results, I wouldn’t be surprised to see PESI stock move toward key technical resistance at $13.00 to $15.00, representing a doubling.

Chart courtesy of StockCharts.com

Strong Revenue Growth & Profitability

The turnaround for Perma-Fix Environmental Services, Inc. came in 2019, when its revenues surged by 48.3% to $73.5 million following three straight years of declines.

The growth extended into 2020 amid the COVID-19 pandemic as the company grew its revenues by 43.5% to a record $105.4 million. This represents an attractive 0.8 times its 2020 revenues, which is cheap.

Fiscal Year Revenues (Millions) Growth
2016 $51.2 N/A
2017 $49.8 -2.8%
2018 $49.5 -0.5%
2019 $73.5 48.3%
2020 $105.4 43.5%

(Source: “Perma-Fix Environmental Services, Inc.” MarketWatch, last accessed June 10, 2021.)

In 2021, I expect revenues could continue to rally. The catalyst will be the global economic recovery from the pandemic and countries focusing on cleaning up the environment.

Along with the financial improvement in 2019, Perma-Fix Environmental delivered healthy earnings before interest, taxes, depreciation, and amortization (EBITDA) income in 2019 and 2020. This suggests the company has been effectively controlling its cost side.

Fiscal Year EBITDA (Millions) Growth
2016 -$934,000 N/A
2017 -$273,000 70.8%
2018 -$2.2 Million -704.0%
2019 $4.6 Million 311.6%
2020 $4.9 Million 6.7%

(Source: MarketWatch, op. cit.)

The turnaround in 2019 also led Perma-Fix Environmental Services, Inc. to move into two consecutive years of solid generally accepted accounting principles (GAAP) profitability.

Moreover, the improved relative earnings growth rate versus 2019 and 2020 is bullish and again suggests that the company has been controlling its costs.

Fiscal Year GAAP Diluted EPS Growth
2016 -$1.15 N/A
2017 -$0.31 73.0%
2018 -$0.12 61.3%
2019 $0.19 260.1%
2020 $0.23 206.3%

(Source: MarketWatch, op. cit.)

Meanwhile, Perma-Fix Environmental delivered positive free cash flow in three of the last four years, including a 190.9% jump to a record $5.7 million in 2020.

Fiscal Year Free Cash Flow Growth
2016 -$367,000 N/A
2017 $3,000 100.8%
2018 $528,000 17,500%
2019 -$6.2 Million -1,277%
2020 $5.7 Million 190.9%

(Source: MarketWatch, op. cit.)

Analyst Take

For a company with a mere $85.0 million in market cap, Perma-Fix Environmental has relatively decent institutional support. About 30 institutions hold a combined 49% interest in Perma-Fix Environmental stock. (Source: “Perma-Fix Environmental Services, Inc. (PESI),” Yahoo! Finance, last accessed June 10, 2021.)

PESI stock looks compelling versus its peer group. Perma-Fix Environmental Services, Inc. trades at 2.2 times its book value and 0.8 times its trailing sales, versus 2.8 times and 1.7 times, respectively, for the company’s peer group.

Ultimately, while the future of the environment is far better now with Biden in charge, Perma-Fix Environmental will need to deliver. If it can do that and continue its strong revenue growth, PESI stock could double.

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