With large-cap stocks continuing to surge higher into record valuations, investors may want to take a step back and focus on small-cap names that remain undervalued by the marketplace. One company that appears to be severely undervalued is Methes Energies (NASDAQ:MEIL). The company has been achieving several milestones over the past few months, and prospects for ongoing rapid growth continue to look good through the rest of 2014 and beyond.
Methes Energies is an innovative best-in-class company that provides a suite of biodiesel solutions targeted at medium- and small-scale biodiesel producers. Part of the suite of solutions includes biodiesel processors that are unique, compact, and fully automated that are capable of running on a wide variety of feedstock. The company markets and sells biodiesel fuel produced at its showcase production facility in Mississauga, Ontario, Canada, and at its facility in Sombra, Ontario. Methes predominantly targets customers in the United States and Canada.
The company has announced several key milestones since early November that have made it one of the best-performing stocks on the Nasdaq over the past 3.5 months. Shares of Methes Energies have exploded higher by more than 50 percent as investors and institutions have begun to realize that shares have been extremely undervalued and remain undervalued.
On November 4, Methes Energies announced that it shipped out 18 rail cars from its Sombra, Ontari,o biodiesel facility. The 18 rail cars contained more than 485,000 gallons of biodiesel fuel, which marked the highest monthly level of shipment in 2013. The 18 rail car shipment more than doubled the company’s previous high of eight cars in April. The increased production is due mainly to the closing of a $1.5 million working capital facility that occurred on August 16. This capital infusion allowed the company to operate the Denami 3000, a state-of-the-art biodiesel processor, which offers roughly five times the production capability of its predecessor, the Denami 600.
In addition to the working capital facility, the company also announced in late October that it would retrofit its biodiesel processors at its Sombra, Ontario, facility. This project will allow the company to begin generating 26 million gallons per year, instead of the 13 million gallons that was previously the maximum. The working capital facility and the doubling of production capacity have set the stage for dramatic revenue growth going forward. The transformation can be seen by analyzing the company’s revenue guidance from December.
In December, Methes Energies announced that it had reached its October and November production goals. Methes also announced that its November production was the highest in the company’s history, surpassing September and October by more than 60,000 gallons. The higher-than-expected production should lead to record revenue numbers for the company’s fiscal fourth quarter. The really impressive part is that the company has already far surpassed 2013 revenue expectations. Over the past three quarters, the company has generated revenue of $4.3 million.
Given that the company has already stated that it believes fourth-quarter revenue will be the highest in its history, we can assume that 2013 fiscal revenue will be at least $6.6 million. If the company can continue to find ways to increase efficiency and production at its facilities, there is no telling how successful the company may end up being.
There was a recent Seeking Alpha article that discussed the future of Methes Energies along with two of its competitors, FutureFuel Corp. (NYSE:FF) and Renewable Energy Group (NASDAQ:REGI). The article did an excellent job of discussing the current fundamentals of each company as well as the ways in which each business could grow substantially in the future. One thing the article did not touch on, however, is the recent price performance of each company.
In terms of recent share price appreciation, Methes Energies is far and away the best biodiesel performer. As mentioned earlier, over the past 3.5 months, shares of Methes Energies have appreciated by more than 50 percent. Over that same period, both FutureFuel and Renewable Energy have experienced share price declines, despite the fact that the overall stock market has continued higher. Shares of FutureFuel have dropped by roughly 10 percent over the past 3.5 months while shares of Renewable Energy have dropped by a more modest 6 percent.
If investors are looking for a growing, undervalued renewable energy company, Methes Energies appears to be a solid opportunity. The company is quickly increasing its production efforts, which have led to record growth. Methes is also dealing with a substantial pipeline of clients around the world that are looking to setup biodiesel facilities using its technology. During this same time frame, investors have begun to realize the potential with shares rising dramatically. It appears that now is the time to invest before shares are no longer the bargain that they are now.