BLUMETRIC ENVIRONMENTAL (BLM – TSXV)

BluMetric (BLM-TSXv) was on the cusp of positive cash flow when I bought it at 92 cents in late 2024.  This Ottawa-based company was providing water systems for the Canadian government and military through key gov’t contractors, and was adding a Caribbean water purification business—which they bought very cheap.

Now, the stock is up 50%, and the defence sector has become super hot—after spending  years in the cold.  I hated defence deals as the sales cycle took YEARS.  No longer! US President Trump has successfully made defence spending a priority across the western world and stocks are responding!  

Here is our original report from late 2024.  I’m still long the stock.

QUICK FACTS

Trading Symbols:                                      BLM
Share Price Today:                                    $0.92
Shares Outstanding:                                 29.4 million
Market Capitalization:                              $27 million

Net CASH:                                                 $1.8 million

Enterprise Value:                                      $25.2 million

THE KIND OF STORY THAT CAN

If I’m going to be honest, my first take on BluMetric Environmental (BLM – TSXv) was…. that it wasn’t that interesting.

I didn’t see a compelling trend in revenue growth.  I saw negative cash flow (it actually isn’t – they generate cash).  The business is in a necessary but lumpy niche where they always need new contracts to keep their flywheel going.

BUT – I’m not giving up on BluMetric.  First off, these junior industrials on the cusp of profitability have done really well in the last 12 months, and enough investors have made good money on them, there is now a big recycling of those capital gains into whatever The Next One might be….and BluMetric is on that list.

Cal Nano (CNO – TSXv) or another environmental services stock that has had a big move, Biorem (BRM – TSXv), are examples of this.

What BluMetric has going for it is:

1. This is a well respected, established company.  Yes, they are on the flywheel, but they don’t do a big sales push – because they don’t have to!
2. Their recent acquisition has the potential for big-time synergies and cross-sell – and opens a big new market for them
3. A couple big contracts could change the shape of profitability

Let’s talk a moment about point C.

Some businesses plough dollars into R&D and marketing to grow.  A lot of tech companies are like this.  Sure, they’re growing 40%, but that doesn’t mean they are getting more profitable.

BluMetric is not that sort of business.  If BluMetric nails down a big contract, almost all those dollars will drop to the bottom line.

That’s the opportunity.  A large deal or a boost from their recent acquisition (a company called Gemini Water) and the game could change for BluMetric.  Gemini sells water treatment systems in the Caribbean, whereas BLM has been very focused on Canada.  Gemini was evidently capital constrained—ie. didn’t have enough money to grow as fast as they could—and now being part of a larger BLM could change that quickly.

I’m going to run you through what the business looks like today.  It’s fine, but its nothing that will make you jump to buy the stock.  What you have to think about, is how BluMetric might look at an even slightly higher revenue run rate.

The company could quickly go from marginally profitable to cash cow.  Right now the stock has a very low valuation of 3-4x EV/EBITDA—but—if they can get their profitability up to be compared against the US-based comps out there—the valuation could quadruple.  Here’s what some recent takeouts in the water space went for:Click Here to continue reading