Macroaxis Stories

Thinking to double down on Pure Cycle (USA Stocks:PCYO) in August?

July 11, 2023  By Raphi Shpitalnik
Macroaxis Story
Pure Cycle Corporation (USA Stocks: PCYO), a player in the Utilities-Regulated Water industry, has shown potential for growth with a revenue of $18.4M and a net income of $9.6M. The company's operating margin stands at 0.2924, reflecting its efficiency in operations. Despite a quarterly revenue growth of -0.36, the company has a strong profit margin of 0.3675, indicating its ability to turn revenue into profit. The stock has a 52-week high of $11.5 and a low of $7.77, with a current naive expected forecast value of $10.93. This suggests a potential upside of 3.41. However, investors should also consider the downside deviation of 1.47 and a possible downside price of $8.83. The company's risk-adjusted performance is 0.1, with a Treynor ratio of 0.3621, indicating a relatively balanced risk-return trade-off. The beta of 0.9355 suggests that the stock is slightly less volatile than the market. The company's valuation real value is $12.55, higher than its market value of $11, suggesting that the stock might be undervalued. The analyst overall consensus for the stock is a 'Buy', with one analyst recommending a buy. However, investors should also consider the company's maximum drawdown of 12.46 and a potential value at risk of -2.44. Therefore, while Pure Cycle Corporation presents a potential opportunity for growth, investors should also consider the associated risks. Pure Cycle is set to announce its earnings tomorrow, with the forthcoming quarterly report anticipated on July 12, 2023. Given the growing interest of millennials in the water utilities sector, we are going to reassess the viability of incorporating Pure Cycle into your portfolio. We will also explain why we maintain our optimism, even as we anticipate a recovery.
Published over a year ago
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Reviewed by Michael Smolkin

Investors looking for growth opportunities may want to consider Pure Cycle (PCYO). The company has shown strong financial performance with a net income of $9.6 million and an operating income of $10.1 million out of a total revenue of $18.4 million. The company's profit margin stands at a healthy 36.75%, indicating a strong ability to convert revenue into profits. Additionally, the company's return on equity and return on assets stand at 6.14% and 2.82% respectively, showing efficient use of shareholders' equity and assets. However, potential investors should be aware of the company's quarterly revenue growth, which reported a loss of 36%, indicating a potential risk.

Widened examination

The asset utilization indicator refers to the revenue generated for every dollar of assets a company currently holds. Pure Cycle has an asset utilization ratio of 17.8 percent. This implies that the company earns $0.18 for each dollar of assets. An increase in asset utilization indicates that Pure Cycle is becoming more efficient in using each dollar of assets for its daily operations.
What is the right price you would pay to acquire a share of Pure Cycle? For most investors, it would be the price that gives them a wide margin of safety to have minimal downside risk. In other words, most investors are always looking for undervalued stocks. Even if the future performance is not entirely as expected, the loss of holding it is minimized, and the downside risk is negated. Please read more on our stock advisor page.

What is happening with Pure Cycle this year

Annual and quarterly reports issued by Pure Cycle are formal financial statements that are published yearly and quarterly and sent to Pure stockholders. The reports show and break down the current year's ongoing operations and discuss plans for the upcoming year. Annual reports have been a requirement from the Securities and Exchange Commission (SEC) for businesses owned by the public since 1934.
Companies such as Pure Cycle often view their annual report as an effective marketing tool to disseminate their perspective on company future earnings or innovations. With this in mind, many companies devote large sums of money to making their reports attractive and informative. In such instances, the annual report becomes a forum through which a company can communicate to the general public any number of topics that may or may not be directly related to the actual data published in the reports.

How important is Pure Cycle's Liquidity

Pure Cycle financial leverage refers to using borrowed capital as a funding source to finance Pure Cycle ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Pure Cycle financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Pure Cycle's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Pure Cycle's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Pure Cycle's total debt and its cash.

Pure Cycle Gross Profit

Pure Cycle Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Pure Cycle previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Pure Cycle Gross Profit growth over the last 10 years. Please check Pure Cycle's gross profit and other fundamental indicators for more details.

Is Pure a risky opportunity?

Let's check the volatility. Pure is looking slightly risky at this time. Whether you invest your money or manage your clients' funds, remember that it is easy to forget that behind Pure (USA Stocks:PCYO) stock is an actual business venture. So, do not let stock picking become an abstract concept by ignoring the elementary risk calculations. obtaining a share of a Pure Cycle stock makes you a part-owner of that company. As we head into August, investors may want to consider Pure Cycle (PCYO) as a potential addition to their portfolio. This utilities-regulated water company, with a market capitalization of $265.08M, has shown promising signs of growth and stability. The company's operating income stands at $10.1M, with a profit margin of 0.37%, indicating a healthy financial performance.
Furthermore, Pure Cycle's net income from continuing operations is reported at $9.6M, demonstrating its potential for consistent profitability. Pure Cycle's debt-to-equity ratio is a meager 0.036%, indicating a low level of indebtedness. This is further supported by a total debt of $4.1M, which is relatively small compared to its net assets of $129.23M. The company also boasts a healthy working capital of $26.96M, which is crucial for covering its short-term liabilities, which stand at $482K. Investors may also find comfort in the fact that 59.99% of Pure Cycle's shares are owned by institutions, indicating a high level of confidence from major financial players. However, the company's beta of 0.94 suggests that it is slightly less volatile than the market, which could be appealing to more risk-averse investors. Lastly, the company's price to earnings ratio is 26.55X, which, while higher than the industry average, may be justified by its growth potential and financial stability. In conclusion, Pure Cycle presents a potential opportunity for growth in the coming month. .

Pure Cycle has a small chance to finish above $11.22 in 2 months

Based on recent market analysis, Pure Cycle's semi-deviation stands at 1.26, indicating relatively low volatility. This suggests that the stock's price fluctuations have been less dramatic compared to other stocks in the market. Consequently, given the current market conditions and the company's performance, there is a slim probability that Pure Cycle's stock will exceed the $11.22 mark within the next two months. Therefore, traders should exercise caution when considering this stock for short-term investment. Pure Cycle has relatively low volatility with a skewness of 1.76 and kurtosis of 6.37. However, we advise all investors to independently investigate Pure Cycle to ensure all available information aligns with their expectations about its upside potential and future expected returns. Understanding different market volatility trends often helps investors time the market. Proper use of volatility indicators enables traders to measure Pure Cycle's stock risk against market volatility during both bullish and bearish trends. The heightened level of volatility that accompanies bear markets can directly impact Pure Cycle's stock price, adding stress to investors as they watch their shares' value plummet.
This often forces investors to rebalance their portfolios by buying different stocks as prices fall. Despite the recent decline in Pure Cycle's stock (PCYO), the company still holds promise for investors. The current market valuation stands at 11, which is slightly below the real value of 12.55. This indicates a potential upside for investors. Furthermore, the possible upside price of 13.03 provides an additional layer of optimism. The analyst consensus is a 'Buy', further solidifying the investment case for Pure Cycle. However, investors should also consider the possible downside price of 8.83 and the naive expected forecast value of 10.93. In conclusion, despite the recent market roll up, Pure Cycle presents a viable investment opportunity, especially for those who can tolerate some level of risk. .

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Editorial Staff

Raphi Shpitalnik is a Junior Member of Macroaxis Editorial Board. Raphael is a young entrepreneur who joined Macroaxis on a part-time basis at the beginning of the pandemic and eventually acquired a real taste for investing and fintech. He likes to analyze different equity instruments across a wide range of industries, focusing primarily on consumer products, sports, fintech, cannabis, and AI. View Profile
This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Raphi Shpitalnik do not own shares of Pure Cycle. Please refer to our Terms of Use for any information regarding our disclosure principles.

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