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  5. HEO: Could you please evaluate Heo metrics and your outlook for a 2 to 3 year hold? [H2O Innovation Inc.]
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Q: Could you please evaluate Heo metrics and your outlook for a 2 to 3 year hold? Thank you.
Asked by Steve on June 12, 2023
5i Research Answer:

HEO operates as a provider of integrated water treatment solutions, the company is now trading at 32x times' Forward P/E. Growth and profitability have improved tremendously in recent years, growth was mainly driven through acquisitions which accelerated into the 30% range in the last year. The balance sheet is leveraged, with net debt of $62M. Net debt/EBITDA is currently at 3.0x. The company did not pay any dividends or share repurchases but instead reinvested back into acquisitions. Historically, HEO also issued shares to do M&A. Growth is AROUND 30%, and the company is trading at 32x which is an okay valuation considering its growth. Its M&A strategy adds some risk, but it has resulted in growth and profitability. Insiders own 5% and have been recent buyers. We would like to see less debt, but otherwise it is an interesting small cap, doing well.