The Ektech (LSE: ETQ) The share price had a tough year. Despite some explosive growth in 2020, the penny stock of this green energy is on a downward trend until 2021. It has decreased by only 0% since the beginning of the year. However, over the past 12 months, Ectech shares have risen about 115%.
Last week, the company released its interim earnings report, which showed some promising signs of progress. So, is the stock going to return? And should I consider adding it to my portfolio? Let’s take a look.
Ektech share price has declined
I have explored this company before. But as a quick reminder, Eqtec is a waste-to-energy business that has created a proprietary gasification technology. This system accepts biomass as well as waste plastics and converts it into a clean synthetic gas that can be used as an alternative fuel for gas turbine power plants.
The UK government recently unveiled plans to eliminate carbon emissions by 2050, so it’s easy for investors to see the lure of this business. Even more so when considering that the energy market from waste is expected to grow by 80% in the next six years.
But as this excitement from investors eventually turned into a fugitive appraisal, the price of Ectech shares pushed the market capitalization of the business to about 0 270m. By comparison, the revenue generated in 2020 came in at only 23 2.23m (£ 1.91m). With that in mind, it’s pretty clear that the stock was inflated massively by unrealistic expectations. Thus, the decline in Ectech share prices throughout 2021 is hardly surprising.
Increase on the horizon
No matter how Ectek’s stock performs, the underlying business is improving. In its latest interim results, it says construction of its power plants in California and Greece continues on schedule. In the meantime, plans have been approved for its main Billingham project. Once built, the facility is estimated to generate enough electricity to power 50,000 homes in the UK. And most recently, the business signed a new three-year cooperation agreement Toyota Motor Decide to explore energy solutions from waste for his car manufacturing plant.
Assuming the current contracts are completed on time this year, the company is ready to generate a total revenue of 15m (£ 12.84m) by the end of 2021. This is an increase of about 580% over a year ago. Needless to say, if the firm can continue to provide three-digit growth, Ectech share prices could start to rise again quickly.
Overall, my views on this business have improved since I last saw it in April. The progress that has been made in the last six months is quite encouraging. However, there is a long road ahead. And even after this year’s fall, Ectech share prices are looking very expensive to me. Therefore, I still keep this penny stock on my watchlist.
Javan Borajian has no position in any of the shares mentioned. Motley Flower UK has no position on any of the shares mentioned. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.