EQTEC (LSE:EQT) shares rose by nearly 10% early on Monday morning after a positive trading update. EQTEC is a bioscience energy company operating in the UK and Ireland. It produces pure synthesis gas — an important source of clean, efficient and sustainable energy and biofuels.
The patented gasification technology replaces traditional incineration. Instead of burning, gasification vaporises waste almost instantly into a gas. This prevents the creation of smoke and exhaust gases, instead producing a synthesis gas.
What’s behind Monday’s jump?
EQTEC shares soared on Monday after the company said that full-year revenue for 2021 grew fourfold compared to last year. Management noted that the company was experiencing significantly increased demand due to macro conditions.
Chief executive David Palumbo said that from “post-Covid challenges to COP26 to more recent geopolitical events, we have experienced more demand than ever and are taking our place as a leading technology innovator for fossil fuel replacements.”
The Cork-headquartered firm said it was planning further new and innovative projects to “raise its visibility and range of propositions.”
In its statement, the firm reported unaudited revenues of €9.2m for the year ending December 31, up from €2.2m in 2020. EQTEC also reduced the loss in underlying earnings to €4.7m from €5.8m in 2020. Net assets rose to €43.4m.
The company also completed a £16m fundraiser. The funds will be used towards market, project and capability growth, according to the statement.
Should I buy?
Growth stocks aren’t in vogue right now amid high levels of inflation and rising interest rates. Higher interest rates can cause companies to put their growth plans on hold as the cost of borrowing increases. It can also cause investors to change their approach and look for stocks offering near-term returns in the form of dividends, rather than long-term share price growth. So, that’s one reason why I’d be concerned about EQTEC’s ability to continue growing.
However, the waste-to-energy sector is definitely an area receiving plenty of attention. EQTEC is now active in seven markets, and it currently has three additional plants under construction and 12 projects under development. In addition to the seven markets, it also established formal legal entities in Greece and Croatia, with two more developments expected in 2022. The firm is also intending to enhance its strategic partnerships with Toyota Motors, among others.
It is worth noting that despite Monday’s jump, the stock is trading far below 2021 levels.
However, I think this is quite a speculative pick. Yes, it could take off. But I think it will face difficulties in encouraging wider adoption of its waste-to-energy products. EQTEC is still a very small company too, and one that has not turned a profit in the last five years. I will put this on my watchlist but I do not think I will be buying this stock any time soon.
