H2O Innovation is a double, Haywood Securities says

Ahead of the company’s fourth quarter results, Haywood analyst Pardeep Sangha remains bullish on H2O Innovation Inc. (H2O Innovation Stock Quote, Chart TSXV:HEO), owing partly to delayed projects coming back on line.

On September 26, HEO will report its Q4, 2018 results. Sangha expects the company will post Adjusted EBITDA of $700,000 on revenue of $25.9-million, slightly ahead of the street consensus of $700,000 in EBITDA on a topline of $25.0-million.

H2O Innovation stock is undervalued, Sangha says

“We like H20 because of its improving profitability and size of the company’s backlog,” Sangha explains. “H2O’s revenue backlog is now the strongest in company history, which will drive revenue growth as the company converts this backlog to revenue. We believe H2O is benefiting from the sector tailwinds and is well positioned to take advantage of the increased water infrastructure spending over the coming years.”

In a research update to clients today, Sangha maintained his “Buy” rating and one-year price target of $2.25 on H2O Innovation, implying a return of 99.1 per cent at the time of publication.

The analyst thinks HEO will post Adjusted EBITDA of $3.7-million on revenue of $101.0-million in fiscal 2018. He expects those numbers will improve to EBITDA of $7.5-million on a topline of $115.5-million the following year.

Sangha adds: “On the conference call, we will be listening for: (The) rate of implementation and revenue recognition of previously delayed projects, updates on the company’s backlog, any new acquisition opportunities in the near-term expectations for EBITDA margin in FY19.”