Pacific Ethanol (PEIX US) is a leading American manufacturer and supplier of low-carbon fuels, renewable and alcohol-based fuels. The company's products are used for the production of industrial and cosmetic products, protein feed and food products.
Key factors:
1) The fight against the coronavirus is a trigger for PEIX!
Pacific Ethanol is one of the main beneficiaries of the
coronavirus infection as the company manufactures sanitizers, and currently is one of the key suppliers of sanitisers in the United States.
In addition, The Company is also one of the largest producer of biodiesel, whose market is seeing a positive momentum nowadays in the United States.
2) A strong forecast for finances for 2021.
Pacific Ethanol is expected to make a real breakthrough in financial growth. According to the Bloomberg forecast, the company's revenue may increase 15%, together with a +83% in EBITDA and increase by almost 4 times the net profit.
3) Discount on multipliers is maintained: taking into account projected growth in the company's financial performance, the stock looks extremely cheap on the market.
At a current price of $ 6.13 we estimate a fair value of $ 44.69, the stock is therefore trading at 86.3% below our estimate
However, it is vital to consider the risks involved as well, In our opinion, key risks are:
1) High competition in the sector, as well as general crisis in the economy.
2) Small scale of the company, which can make it harder for PEIX to compete in the market.
OTB Global Investments
4 December 2020
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