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The Tech Company You’ve Been Looking for: Dirtt Environmental Solutions Ltd (TSX:DRT)

If you’ve never heard of Dirtt Environmental Solutions Ltd (TSX:DRT), you’re not alone. With a market capitalization of just $600 million, it’s overlooked by most investors.

But if you’re looking for the next big technology stock, start paying more attention to Dirtt.

A boring business made exciting

The construction business may not sound like a big opportunity for cutting-edge tech, but Dirtt has found a way to complete the entire building process using proprietary software which cuts costs, reduces timelines, and increases customer satisfaction.

Dirtt’s management team bills the company as a “manufacturer of custom, prefab interior environments,” but it’s more exciting than that. The company built its own 3D design, configuration and manufacturing software (ICE) that integrates and unifies every step of the construction process.

Dirtt’s ICE platform provides financial and timeline certainty in an industry rife with cost overruns and construction delays. Its intellectual property is protected by more than 218 patents. Over the past 12 months, the company has generated $332 million in sales and $37.6 million in EBITDA. Since 2013, revenue has grown at an annual rate of 20%.

The sustained level of sales growth is fueled by a large, under-penetrated market that’s estimated to be $150 billion large in North America alone. Currently, there’s a shortage of skilled labour, making the entire building process more expensive and timely. Dirtt’s ICE platform automates nearly the entire process, thereby offering relief in an increasingly constrained market.

By reducing complexity and resource use, Dirtt is also primed to meet increased demand for environmentally friendly buildings and spaces. Dirtt’s management estimates that less than 1% of major markets have been penetrated, leaving plenty of high-growth opportunities in places like New York City, Boston, Los Angeles, Chicago, Toronto, Vancouver, and more.

Get ready for other investors to take notice

Currently, Dirtt trades at just 15 time EBITDA. With a net cash position of more than $50 million, its cash flow can go toward improving its competitive position through research and development. There should also be plenty of cash left over for share repurchases and dividends.

Notably, 2019 will be an inflection point in the company’s history. It recently welcomed a new CEO and CFO, both of whom are focused on improving important metrics like EBITDA margins and free cash flow.

Even more exciting is that the company now anticipates listing its shares on the NASDAQ starting in 2019. That move alone should bring plenty of new interest to the company, including more analyst coverage, increased financing options, and higher odds of being selected for major ETFs and indexes.

Dirtt is a great bet for two reasons

In a turbulent market, it’s important to find value stocks that will be supported by strong, long-term tailwinds. The saying is true: a rising tide lifts all boats.

For Dirtt, one industry’s problems is its treasure. Rising costs, regulation, and complexity combined with labour shortages will continue to make Dirtt’s ICE platform more and more valuable. With nearly the entire construction market still yet to move to these services, Dirtt is perfectly positioned to ride the wave of automation in the construction industry.

This year, expect it to list its shares on the NASDAQ, thereby pushing the company’s promise into the spotlight. It’s an under-the-radar pick, but tech investors looking for a rare bargain should strongly consider Dirtt Environmental Solutions.

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Fool contributor Ryan Vanzo has no position in any stocks mentioned.

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