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Is buying EQTEC shares a good investment?

by | Last updated 27 Nov, 2022 | Energy

Key Points

  • The gasification technology used by EQTEC that prevents burning is new and unique
  • The company reported a fourfold increase in revenue in 2021
  • New investments, strategic partnerships and investment in R&D are leading to robust revenue growth

EQTEC (LSE:EQT) shares have had a rough couple of months and in the past year, they’re down nearly 50%. As a reminder, the firm designs and supplies advanced gasification procedures that have a higher efficiency product offering. The versatility of this technology can process roughly 50 different types of feedstock and does not rely on a traditional combustion process. In other words, there are no harmful exhaust fumes.

That certainly sounds like a potentially promising ESG investment. So, should I be considering EQTEC shares for my portfolio? Let’s explore.

Are EQTEC shares expected to rise?

EQTEC recently reported its full-year earnings report for 2021. And the results were outstanding, in my opinion. The company reported revenue of €9.2 million, a fourfold increase in revenue from last year. And management expects this to further rise in coming years in line with surging demand.

In addition to a huge surge in top-line earnings, EQTEC seems to have a robust sales pipeline. There are multiple projects under development across the US, UK, France, Greece, and Ireland. What’s more, several of these have progressed to the construction phase during 2021.

Given this encouraging progress, it’s hardly surprising that EQTEC shares jumped over 10% in a single day when results were initially released. And over the long term, I wouldn’t be surprised to see similar growth spurts as the world continues its progress in decarbonisation.

But since the start of the year, this momentum has somewhat waned. While this is arguably attributable to the current market environment, there are some valid concerns being expressed by investors.

What are the challenges the company is facing?

Despite the rise in demand for the services EQTEC offers, the one thing that is vital for sustained financial growth is winning and successfully delivering a contract portfolio. So far, the group seems to be on track. But if contracts stop flowing in, management may struggle to raise capital on advantageous terms. Given this is an unprofitable business, that could have severe repercussions.

Another risk to which the bio-science group is exposed is operational, financial, legal, and/or compliance risks whenever there is a strategic collaboration. In cases like these, the company has less control over its business operations. Hence the risk of unexpected challenges is there.

Will I be investing in EQTEC shares?

In my opinion, as the business progresses so will the EQTEC shares. Without doubt, the planned investment in new projects is expected to lead the alternative energy business towards robust growth in revenue along with a reduction in EBITDA losses in 2022.

Firstly, the company is investing in innovation via its three-year R&D program for technology development. Next, EQTEC is planning to expand its network by partnering up with multinational and local market-specific partners. Finally, EQTEC is focusing on increasing awareness about Net Zero Future and how it’s contributing to it.

All things considered, this sounds like a promising business within the alternative energy space. And personally, despite its high-risk nature I’m tempted to add a few shares to my portfolio today.

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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.

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