Buy this Canadian microcap for a double, analyst says

Beacon Securities analyst Russell Stanley maintained his $0.30 target on Thermal Energy International (Thermal Energy International Stock Quote, Chart, News, Analysts, Financials TSXV:TMG) after third-quarter fiscal 2026 results, saying stronger cash flow and improving trailing margins offset lighter-than-expected EBITDA.

Thermal Energy reported revenue of $9.4-million and Adjusted EBITDA of $0.5-million, compared with Stanley’s estimates of $8.1-million and $1.3-million. Revenue rose 62% year-over-year, but EBITDA missed mainly because of higher operating expenses, including a $0.4-million foreign-exchange impact.

Stanley said the company’s revenue mix and backlog have returned to pre-COVID norms, with about two-thirds of revenue from lower-margin turnkey heat recovery projects and one-third from higher-margin custom equipment sales. Adjusted EBITDA margin still improved 838 basis points year-over-year.

Cash flow was stronger than the analyst expected. Thermal Energy generated $2.5-million in operating cash flow, ahead of Stanley’s $1.4-million forecast, helped by accounts receivable collections. The company ended the quarter with $4.0-million in cash, up from $2.0-million sequentially, and debt and leases of about $1.0-million.

The analyst said backlog stood at $14.7-million at quarter-end and had since improved to $16.3-million after additional orders. On a trailing 12-month basis, revenue rose nine% to more than $33-million, Adjusted EBITDA increased 93%and orders rose 42% to more than $31-million.

Stanley expects Thermal Energy to generate $2.6-million in Adjusted EBITDA on $36.4-million in revenue in fiscal 2026, improving to $5.1-million in Adjusted EBITDA on $45.5-million in revenue in fiscal 2027.

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