This microcap stock is a buy, analyst says

Beacon Securities analyst Russell Stanley reiterated a “Buy” rating and $0.30 target price on Thermal Energy International (Thermal Energy International Stock Quote, Chart, News, Analysts, Financials TSXV:TMG) in a Jan. 22 second-quarter preview, ahead of the company’s results and conference call scheduled for Tuesday at 8:30 a.m. ET.

Thermal Energy, which has a May 31 fiscal year-end, will report Q2 results for the quarter ended Nov. 30 on January 27th.

Stanley said Beacon is forecasting revenue of $7.1-million and Adjusted EBITDA of $0.1-million, reflecting modest sequential growth from $6.8-million in Q1. His gross margin forecast of 44% is conservative relative to the 47% achieved in the prior quarter, noting that margins can vary quarter to quarter depending on the mix between lower-margin heat recovery projects and higher-margin custom equipment sales. Beacon is also modelling operating cash flow of $0.4-million for the quarter.

Beacon Securities analyst Russell Stanley says Thermal Energy is still trading at roughly four times calendar 2026 Adjusted EBITDA, representing an estimated 80% discount to the 20x-plus multiple at which large peers such as Trane Technologies trade…

Backlog will be another key focus. With its Q1 results in late October, management reported backlog of nearly $21-million, up 13% year over year, providing improved visibility into future revenue.

Stanley said recent contract wins underscore the company’s expansion potential within its existing customer base. Roughly 60% of Thermal Energy’s order flow over the past four years has come from its top ten corporate customers. While the company currently has partial penetration at about 100 production sites, those customers operate roughly 1,000 sites globally, implying penetration of only about 5%. As highlighted in Beacon’s Dec. 17 note, Thermal recently announced $4.9-million in new orders from two repeat customers that together operate approximately 50 additional sites, representing a meaningful opportunity for follow-on work.

From a valuation perspective, Stanley said the technical backdrop has improved materially, with the shares having rallied through all three major moving averages since mid-December. Despite that move, Thermal Energy is still trading at roughly four times calendar 2026 Adjusted EBITDA, representing an estimated 80% discount to the 20x-plus multiple at which large peers such as Trane Technologies trade. Near-term catalysts include the Q2 results, additional contract awards, and potential M&A activity.

Stanley forecasts that Thermal Energy will generate $4.9-million in Adjusted EBITDA on $38.2-million of revenue in fiscal 2026, improving to $7.8-million in Adjusted EBITDA on $47.7-million of revenue in fiscal 2027.

Thermal Energy International is an Ottawa-based clean-technology company with operations and offices in the U.K., the U.S., Italy, and China, focused on industrial waste heat recovery and energy efficiency solutions.

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