Editor’s note: The following post by TheRock07 appeared on the H2O Innovation 2000 Inc. (TSX: V.HEO, Bullboard) Bullboard at 2:09pm EST on April 16. It has been edited for spelling, punctuation and grammar only, in an effort to make it easier to read. Click on the text link within the quote to view the post in its original form.

Clean water and the treatment and disposal of waste water is going to be a very stong sector for the next 5-10 years. Everywhere you look, there is a water crisis and that includes North America as well. For these reasons, water treatment stocks trade at very high multiples, due to their future growth prospects and also because so few are publicly listed.

For example, Pure Technologies Limited (TSX: V.PUR, Bullboard), which trades at $3 with a market cap of $120 million, had revenues of $15 million in 2007 and is trading at 45 times net earnings. Its market cap to sales ratio is 8.

Bioteq Environmental Technologies (TSX: T.BQE, Bullboard), which trades at $3.40 and has a market cap of $225 million, had sales of less than $5 million in 2007 and lost over $4 million in the process. Its market cap to sales ratio is 45.

HEO (90 cents per share, market cap of $33 million) has annual sales of $8 million. Its market cap to sales ratio is 4.

Seprotech Systems (TSX: V.SET, Bullboard), trading at 20 cents, had sales of $7.5 million and earned 1 cent per share in 2007. It has a market cap of $8 million and trades at 1 times annual sales.

All of these have their strengths and all have excellent growth profiles, with HEO and SET likely to double their sales over the next 4 quarters.

My water stocks are HEO and SET, because they are very cheap compared with BQE and PUR and they offer an excellent chance for a double or more, and I think SET is a sitting duck for a takeover, as its acquisition would double the annual sales of any of the other 4.

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TheRock07

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