ADES To Tackle Climate Change: An Opportunity To Maximise Shareholder Value


Advanced Emissions Solutions (NASDAQ:ADES) is looking to help curb global warming through lowering emissions in the power industry, and make a nice profit from it.

Companies like Advanced Emissions Solutions, Inc., together with its subsidiaries, engage in the provision of environmental and emission control equipment to the power generation industry. To remain competitive, the company invested $1 million into research and development to innovate different products with suitable environmental implications.

This works in conjunction with partner company ADA, who hold over 30 US patents for emissions control technology and systems in a highly fragmented industry. They are clearly looking to expand their market share and become notable within the pollution correction industry.

ADES will now also be operating outside of North America due to their agreement with Cabot Corporation in EMEA markets. This could lead to more services in the area and increasing overall income.

With the increasing magnitude of the climate challenge it is increasingly likely to see low-carbon technologies become a success. ADES possesses the capabilities to bring these technologies to the market in the form of products and services, and serve global mainstream markets instead of just local niche markets.

Is revenue at risk?

The ADES financial performance is not satisfactory, with a decline of 12.14% in revenues due to the pandemic. Also, the company’s cost of sale is high compared to revenues which ended in losses in recent years. The implication of this is that ADES needs to revive their business model and try to implement innovative ways to develop the products in a cost-effective way without compromising the quality.

To boost the profitability, Advanced Emissions Solutions have increased prices from 10% to 15% on all activated carbon products and front-end coal additives. The rise in price is due to increases in raw material, transportation, and operational costs related to products.

On a positive note, the company has enough cash reserves to meet its short-term liabilities and the level of debt is low as well. Additionally, ADES has recently paid their outstanding term loan balance of $70 million, which is a critical step in optimizing its cash flows to maximize shareholder value.

Bright future ahead


With the intrinsic value of the stock placed at approximately $66.01 per share as opposed to its current price of $6.81, as of 24th July, ADES stock is undervalued by over 90% due to their future expected cash flows. Similarly, ADES is good value based on its PB Ratio (1.3x) compared to the US Chemicals industry average (2.9x), indicating that ADES is outperforming the market.

The ADES stock has gained significantly by 55% over the last year.

Due to manufacturing assets, product and technology expertise, along with the strategic transactions completed during the last twelve months, ADES is in an advantageous position within the activated carbon market.

This stock is a great pick particularly for “green investors”, as we expect this stock to outperform the average total return of the market over the next six to twelve months. Additionally, a research highlighted that the market for industrial air pollution control solutions is expected to grow with a CAGR of 6% or more from 2020 to 2025 which will help to maximise market share and shareholder value in the longer-term.

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