On September 28, before market open, H2O Innovation will report its fourth quarter and fiscal 2017 results. Sangha is expecting the company will post Adjusted EBITDA of $500,000 on revenue of $21.4-million, a little softer than the street consensus of EBITDA of $600,000 on a topline of $21.6-million.
Sangha says on the conference call that follows the results he will be listening for updates on the company’s growing backlog, progress on expanding its O&M networks and new acquisition opportunities.
The analyst says H2O is cheap compared to its peers.
“H2O is currently trading at 0.7x EV/Revenue of our CY18 estimates, which is below its industry peer group average of 1.7x EV/Revenue based on consensus CY18 estimates,” the analyst explains. “Our target price is based on applying a 1.1x EV/Revenue multiple of our FY18 forecast, which represents a 0.9x EV/Revenue multiple of our FY19 revenue estimate.”
In a research update to clients today, Sangha maintained his “Buy” rating and one-year price target of $2.00 on H2O Innovations, implying a return of 60 per cent at the time of publication.
Sangha thinks H2O will post EBITDA of $2.2-million on revenue of $82.5-million in fiscal 2017. He expects those numbers will improve to EBITDA of $4.9-million on a topline of $94.9-million the following year.