BioLargo Inc. (BLGO:OTCQX) reported its Q2/24 financial results, the highlight of which was revenue growth, reported Singular Research analyst Gowshihan Sriharan in an Aug. 30 research note.
"BioLargo is an innovation and development company experiencing rapid revenue growth, doubling revenue in each of the last two years," Sriharan wrote.
"Significantly undervalued" stock
The analyst pointed out that despite BioLargo delivering a 35% return year to date, it "remains significantly undervalued." It is trading now at about $0.25 per share.
This compares to Singular's $0.36 per share 12-month price target on the cleantech company, down from $0.45 previously.
The difference between the current and target prices implies a potential return for investors of 44%.
"We see significant upside potential in BLGO shares," wrote Sriharan.
The company remains a Buy.
Positive cash flow continues
Sriharan presented BioLargo's Q2/24 results.
Revenue was $5 million ($5M), 7% higher than Singular's estimate of $4.69M. Also, Q2/24 revenue was up 247% year over year and 5% quarter over quarter (QOQ). Nearly 70%, or $3.5M, of the total revenue came from sales of Pooph, BioLargo's line of odor control products, first distributed in 2022 via Walmart.
The company had its second consecutive quarter of positive cash flow in Q2/24. Operating cash flow was $330,000. Also during the quarter, the sale of 454,547 shares generated $152,000 in gross proceeds. BioLargo's cash balance at quarter's end was $4.7M.
The company's Q2/24 gross margin was 46.2%, down QOQ by 60 basis points. This drop was due primarily to higher raw material costs and a less favorable sales mix, noted Sriharan.
As for costs, total operating expenses in Q2/24 were $3M because of sales, general and administrative (SG&A) and research and development (R&D) expenses. The SG&A expense was 8% higher QOQ at $2.4M. The R&D expense, though, was 20.5% lower QOQ, at $620,000.
For the quarter, BioLargo posted a net loss of $780,000 or $0.01 per share.
Revenue-boosting opportunities
Sriharan briefly discussed the various enterprises BioLargo is advancing and commented, "We are bullish on BioLargo's long-term prospects."
As for Pooph, management expects about $20M in full-year 2024 revenue from it, reflecting a 20% QOQ growth rate. The recent debut of new Pooph products and the addition of Target and Ralphs to retailers carrying the products should boost sales growth.
"Pooph is a hit with consumers," Sriharan wrote.
BioLargo's PFAS remediation business could boost revenue, too, noted Sriharan. The company's first project, for a New Jersey municipality, is in progress, and completion, expected in November, will be a major milestone. Also, BioLargo is bidding on other PFAS remediation projects for prospective industrial and municipal customers. Management estimates this line of business to be a $17 trillion opportunity.
"BioLargo has developed a patented AEC technology that stands out as one of the rare commercially accessible solutions capable of reducing PFAS concentration in drinking water to undetectable levels," explained the analyst.
Regarding Bioclynse, the surgical wound irrigation solution product of BioLargo subsidiary, Clyra Medical Technologies, it is nearing commercialization. A next step is selecting a distributor.
Also, BioLargo continues developing its battery technology, with testing and manufacturing of its lithium sodium cells having begun. Management's ultimate goal with this venture is to sell battery factories not the batteries themselves.
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