Basin Water: Whet Your Appetite For Upside Exposure

In mid-May, Basin Water (BWTR) reported a sharp decline in first quarter revenues of $1.6 million and a net loss of $2.2 million, compared to revenues of $3.7 million and a net loss of $0.4 million in the year-ago period. The company blamed the poor results on financing delays for several projects and a comprehensive internal restructuring initiative at the company, transitioning it from an initial start-up operation to one that is able achieve profitability and growth by the second half of this year and beyond.

The company -- which designs, manufactures, and installs ion exchange systems to purify underground water -- ended the quarter with a strong balance sheet, holding a cash balance of over $50 million with current liabilities less than $7 million. Putting some of its cash stash to use, Basin Water also announced a $10 million stock repurchase program in conjunction with its quarterly results. Management is confident in the company’s future growth potential, and the stock is now trading almost $10 lower than its debut price of one year ago.

The company is worthy of consideration by patient investors with an eye for out-of-favor, micro-cap stocks with excellent future growth opportunities. Clean water is becoming an increasingly precious and valuable commodity in this country and throughout the world, which provides Basin Water with plenty of future growth opportunities as it seeks to expand nationwide from its current operations in the western states. With a market cap of about $135 million, a decline of over 60% since its IPO one year ago, a low float of just over 14 million shares, and a high short interest of just under 3.5 million shares; the stock has all the ingredients for a quick move to the upside if it can execute on its plan to achieve profitable, top line growth in the second half of this year and beyond.

BWTR 1-yr chart

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