The Quadrise Fuels International (LSE:QFI) share price has been performing exceptionally well. Over the last 12 months, the stock is up by more than 330%, despite the fact it currently has no substantial revenue stream. What’s causing this explosive growth? And should I be adding this business to my portfolio?
The rising Quadrise Fuels (QFI) share price
Quadrise operates within the oil industry but offers a relatively unique product. Using its proprietary Multiphase Superfine Atomised Residue (MSAR) technology, the company produces a synthetic heavy fuel oil (HFO).
Why’s this so exciting? HFO first became popular in the 1960s and is used predominantly to power large cargo ships. Today, approximately 60% of all ocean-bound vessels use it as a fuel source due to its low cost-to-energy ratio. The problem is HFO produces significant greenhouse gas emissions. And it’s also highly toxic when mixed with water or exposed to sunlight.
With the world shifting towards carbon neutrality, maritime regulators are trying to reduce the reliance on the material. And that’s where Quadrise steps in.
It combines HFO residue with water using its MSAR technology to create a non-toxic alternative fuel for cargo ships that is just as effective. What’s more, the substance is significantly cheaper, and it weighs less, thus reducing storage and handling costs. But, most importantly, carbon dioxide and the more harmful nitrogen oxide emissions are reduced by up to 30%.
Quadrise’s alternative fuel came onto the market in December last year. And in February, after some initial testing, the material was proven as a viable and more efficient fuel source for diesel cargo-ship engines. So I’m not surprised the QFI share price has been surging.
The risks ahead
Despite making tremendous progress, the company still has a long trip ahead. Quadrise does have some minor sources of income from its various projects worldwide. However, these aren’t currently sufficient to sustain the business, especially since Covid-19 has proven to be such a disruptive force.
As a result, the firm is currently unprofitable and is thus dependent on external financing to keep the lights on. In fact, it recently completed a share placement and open offer that successfully raised around £7m. This should be sufficient to see it through until July 2022. But I think it’s likely it’ll need to raise additional capital again in the future.
Naturally, an unprofitable, semi-pre-revenue business adds a considerable level of risk for investors. But supposing it can successfully penetrate the market and achieve its goals, I believe the QFI share price could continue to surge even higher.
The bottom line
Quadrise’s technology sounds incredibly promising to me. And given the rapidly climbing QFI share price, investors seem to agree. Having said that, there are still quite a few unknowns which makes me believe it might be too early to invest in at this stage. For now, I’m waiting to see how it progresses with its projects throughout 2021.
Zaven Boyrazian does not own shares in Quadrise Fuels International. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.