Fast-growing, high-tech firm PyroGenesis Canada’s (TSX:PYR)(NASDAQ:PYR) stock price closed at $5.73 on Tuesday after a 12.8% rally during the trading session. The rally was triggered by a bullish news piece concerning a new customer order that could drastically change the company’s future financial performance.
PyroGenesis Canada is a leader in the design and manufacturing of advanced plasma processes, which promise to help global companies economically switch from environmentally damaging fossil fuel burners to clean furnace heating processes.
The company announced on Tuesday the receipt of a new customer order for four high-powered plasma torches with ancillary equipment. Worth approximately $6 million, the order comes from an undisclosed multi-billion-dollar international iron ore palletization company that intends to switch over from fossil fuel burners to clean, electric-powered plasma torches to reduce its greenhouse gas emissions.
Investors warmed up to the news, and the stock’s rise on Tuesday could generate new positive momentum during the remainder of September.
PyroGenesis might just have scored a big business opportunity with this “initial” order.
For a start, the latest $6 million order almost equals the company’s current full-quarter revenue run rate. PYR reported a strong 289% year-over-year revenue-growth rate to $8.3 million for the second quarter of this year. This followed another emphatic 771% increase in quarterly sales to $6.3 million reported for March this year.
The latest customer order solidifies the company’s revenue-growth rate, but this is not the best part
If implemented successfully, and the customer is happy with the technology, the latest deal could unlock a record order of 130 additional plasma torches from the same customer. At current implied prices, that’s a huge $195 million opportunity, and the company could easily bag it.
Capacity upgrades, big orders, and recurring revenue growth
Suddenly, investor concerns may turn from whether PYR could generate new business to sustain its recent stellar growth rates to whether the company is capable of delivering on large orders. Given PyroGenesis’s recently expanded production footprint in Montreal, Quebec, large orders may be fulfilled.
In a news piece in May this year, the company’s founder and CEO Peter Pascali was quoted saying that the new production equipment the company installed this year “…will significantly reduce the manufacturing time of our plasma torches. For example, parts that previously took 4(four) hours to manufacture will now take 15 minutes. PyroGenesis will produce parts faster and at lower cost, thereby reducing delivery times while increasing profitability.” I believe capacity is available for the company to meet increased customer demand.
Most noteworthy, plasma torch sales come with opportunities for recurring revenue through maintenance services and spare parts. With the latest order, management at PYR has increased the present value of each torch sale by 133% from $3 million to $7 million. The company anticipates realizing more profits from its legacy plasma torch business line.
Foolish bottom line
The good times are rolling for PyroGenesis Canada stock investors. The latest customer order could precede a much bigger jackpot and grow the company’s high-margin recurring revenue streams. Investors are taking notice.
PYR remains one of my favourite stocks to own in 2021. Shares have returned just 25% so far this year. We could witness a rally during the fourth quarter if bullish news pieces like the latest order win keep coming out.
An increased global focus on combatting climate change could unlock many more opportunities for the company’s plasma-based heating technology, while new ventures in battery-grade silicon manufacturing could unlock new opportunities in the electric vehicle space.
The future looks promising for PyroGenesis Canada stock. More capital gains could accrue to long-term investors over the coming decade.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Brian Paradza has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.