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Evoqua Water Technologies ̶ Coming On Strong

04/23/20 04:08:02 PM
by Matt Blackman

Stocks have been recovering after the drubbing they took in March and some clean technology companies are leading the pack. Here is one.

Security:   AQUA
Position:   N/A

Evoqua Water Technologies (AQUA) delivers products, solutions and services to ensure water quality and consistency for municipalities, industrial water users and recreational facilities, according to the company website.

So why is this important? There are a growing number of North American communities that have challenges providing clean water. According to the EWG.org, there are 1,477 sites in 49 states contaminated with polyfluoroalkyl substances (PFAS) alone, a group of 5,000 chemicals known as "forever chemicals" because they take so long to break down and are linked to a myriad of health problems from increased cholesterol to immune system problems and several types of cancer. PFAS are just the tip of the iceberg when it comes to toxic chemicals now found in our water.

Figure 1. Daily chart of Evoqua Water Technologies showing the bullish bottom pattern from mid-March into April with a cup like pattern and pattern resistance which is then broken.
Graphic provided by: Freestockcharts.com.
 
According to the National Resources Defense Council (NRDC) nearly 77 million people were served by more than 18,000 community water systems that violated the Safe Drinking Water Act in 2015 and that is before the U.S. Administration began to dismantle environmental legislation.

Needless to say this creates a significant opportunity for water pollution treatment and clean-up companies like Evoqua. The company saw its stock price rise more than 200% between late November 2018 and mid-February 2020, and although it gave most of that gain back over the next month, AQUA recovered nicely into mid-April, up 70% in just three weeks. But as we see from Figure 2, price is still below its long-term linear regression line, so still undervalued from a technical perspective.

Figure 2. Weekly chart showing AQUA compared to its Pollution and Treatment Controls industry performance (purple) and the three-year linear regression line (red).
Graphic provided by: Freestockcharts.com.
 
AQUA shows a strong balance sheet with earnings up more 390% in the latest quarter and than 800% in the latest year on earnings of $60.4 million. More than 57% of its shares are held by institutions.

Technically the stock is recovering strongly from the March meltdown as it put in a V type bottom before posting a cup pattern that looks to be morphing into a bull flag with support around $14. Assuming the market doesn't get hit with another spate of bad news, look for AQUA to work back up toward $20.

If $14 is broken on above average volume, it will be time to exit and wait for more positive stock action.

I discuss other clean technology companies that are leading the 4th Industrial Revolution in other articles in Traders.com Advantage and TASC.

Suggested Reading

Evoqua Water Technologies Website

Threats on Tap: Widespread Violations Highlight Need for Investment in Water Infrastructure and Protections

Brookfield Asset Management - Another Good Green Tech Bet?

Fossil Fuels Vs. Clean Energy: Time To Shift Your Money?



Matt Blackman

Matt Blackman is a full-time technical and financial writer and trader. He produces corporate and financial newsletters, and assists clients in getting published in the mainstream media. Matt has earned the Chartered Market Technician (CMT) designation. Follow Matt on Twitter at www.twitter.com/RatioTrade

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