Why Thermal Energy International Is a Stock to Watch

Why We Like The Stock

Strong Financial Performance

Thermal Energy has demonstrated solid financial growth. For the trailing twelve months (TTM) ending May 31, 2024, revenue reached $26.56 million, up from $21.09 million in the previous year. Gross profit also increased significantly, reflecting effective cost management. Their net income for TTM 2024 was $1.62 million, which is a solid turnaround from previous losses.

Innovative Tech and Solutions

Thermal Energy offers a range of effective products, including GEM steam traps and FLU-ACE heat recovery systems. These technologies reclaim up to 80% of energy lost in typical boiler and steam systems, making them highly relevant as industries aim to reduce carbon emissions. Other products include DRY-REX biomass dryers and various heat recovery and condensate return systems, catering to a wide range of industrial applications.

Strategic Expansion and Investments

The company has made strategic moves to support growth, such as developing new tools like the Carbon Reduction Scoping Tool and implementing a global ERP software to streamline operations. Additionally, their recent move to a new production facility in the UK has doubled their throughput capacity, positioning them well for future growth.

Record Order Intake and Backlog

In Q3 2024, Thermal Energy reported record order intake and backlog levels. Orders totalled $8.3 million, and the TTM order intake reached $29.6 million. Their order backlog at the end of Q3 hit an all-time high of $20.4 million. This shows strong demand and gives us confidence in their revenue pipeline.

Growth in Project Development Agreements (PDAs)

They’re seeing solid growth in PDAs, which are paid engineering studies often leading to full project orders. By Q3 2024, they had 31 live PDAs, up from 28 the previous year. This growth indicates strong business development and future project potential.

Promising Market Outlook

The push for energy efficiency is stronger than ever. According to the International Energy Agency, global investment in energy efficiency needs to triple by 2030 to hit net zero by 2050. Thermal Energy is well-positioned to ride this wave of increasing demand for green solutions.

What To Watch Out For

Thermal Energy International faces a few risks and challenges investors should be aware of. The company's heavy reliance on large industrial clients and Fortune 500 companies means any economic downturns or shifts in regulatory environments could impact these clients' capital spending on energy efficiency projects. Additionally, while their focus on innovation is a strength, it requires continuous investment, which could pressure short-term profitability. Supply chain disruptions, given their global operations, could also affect their ability to deliver projects on time. Despite these risks, their strategic investments and strong market position aim to mitigate these challenges.